The DCIT, Circle-9, Ahmedabad V. Shri Jagdishchandra B.Patel, Ahmedabad

ITA 2518/AHD/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5843 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 31-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 07-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R I PATEL
• Keywords: Capital asset; Additional evidence; Cost of acquisition
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA NO. 2518/AHD/2012 & CO. NO.29/AHD/2013 (ASSESSMENT YEAR:2009-10) D.C.I.T., CIRCLE -9, AHMEDABAD APPELLANT VS. SHRI JAGDISCHANDRA B PATEL 4A KETAN SOCIETY, NR. SARDAR PATEL COLONY, NAVJIVAN POST, AHMEDABAD 380013 RESPONDENT/CROSS OBJECTOR PAN: AFUPP4222L /BY REVENUE : SHRI R. I. PATEL, CIT D.R. /BY ASSESSEE : SHRI DHIREN SHAH, A.R. /DATE OF HEARING : 31.03.2017 /DATE OF PRONOUNCEMENT : 16.05.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL AND ASSESSEES CROSS OBJECTIO N FOR ASSESSMENT YEAR 2009-10 EMANATES FROM THE CIT(A)-XV, AHMEDABAD S ORDER DATED 13.08.2012, IN CASE NO. CIT(A)-XV/DCIT/CIR-9/457/11 -12, IN PROCEEDINGS U/S. 143(3) OF THE INCOME TAX ACT, 1961, IN SHORT THE ACT. ITA NO. 2518/AHD/2012 & CO NO.29 AHD 2013 ( DCIT VS . SHRI JAGADISHCHANDRA B PATEL) A.Y. 2009-10 - 2 - 2. THE REVENUES SOLE SUBSTANTIVE GROUND PLEADED IN ITS APPEAL SEEKS TO RESTORE ASSESSING OFFICERS ACTION DISALLOWING EXPE NDITURE CLAIM OF RS.10,61,47,415/- U/S. 48(1) OF THE ACT BY TREATING THE SAME AS NOT CONNECTED TO TRANSFER OF THE LAND. THE ASSESSING OFFICER HAD MADE THE SAID DISALLOWANCE IN ASSESSMENT ORDER DATED 29.12.2011. THE CIT(A) HAS DELETED THE SAME IN THE LOWER APPELLATE ORDER UNDER CHALLEN GE. THIS CULMINATES IN REVENUES INSTANT APPEAL FOLLOWED BY ASSESSEES CRO SS OBJECTION SUPPORTING THE CIT(A)S ACTION DELETING THE ABOVESTATED DISALL OWANCE. 3. WE NOW ADVERT TO THE RELEVANT FACTS. THE ASSESS EE IS STATED TO BE DEALING IN SHARES ALONGWITH FUTURES AND OPTIONS. H E PURCHASED THE LAND IN QUESTION AT SARKHEJ MOUJE, DISTRICT AHMEDABAD ALONG WITH HIS BROTHER SHRI HITENDRA B. PATEL AND A FRIEND NAMELY SHRI AJAY H. PATEL. THE SAID PURCHASE TRANSACTIONS WERE EXECUTED BETWEEN NOVEMBER 2003 TO FEBRUARY 2004. THE ASSESSEES SHARE THEREIN WAS 1/3 RD . HE THEREAFTER ENTERED INTO A DEVELOPMENT AGREEMENT DATED 30.03.2007 WITH ONE M/S. PRERNA INF RABUILD PVT. LTD. THIS AGREEMENT FORMS PART OF THE CASE RECORDS. THE ASSE SSEE THEREIN APPEARS TO HAVE UNDERTAKEN THE OBLIGATION OF GETTING ASSIGNMEN T OF DEVELOPMENT RIGHTS IN RESPECT OF THE REMAINING 2/3 RD SHARE IN FAVOUR OF THE ABOVESTATED ENTITY. HE FURTHER MADE HIMSELF RESPONSIBLE FOR CONVERTING THE AGRICULTURAL LAND TO NON AGRICULTURAL. THIS FOLLOWED YET ANOTHER AGREEMENT BY WAY OF A MEMORANDUM OF UNDERSTANDING BETWEEN ASSESSEE AND THE ABOVESTAT ED TWO OTHER CO-OWNERS ON THE ONE SIDE AND M/S. SATLON INVESTMENT PVT. LTD . ON THE OTHER SIDE. THESE PARTIES APPEAR TO HAVE AGREED TO OBTAIN CONVEYANCE OF THE ABOVESTATED LANDS IN FAVOUR OF A YET ANOTHER PURCHASER M/S. APPLEWOOD S ESTATE PVT. LTD. THESE AGREEMENTS / MOUS TOOK PLACE IN JANUARY 2008. THE R ELEVANT DATES THEREIN ARE 04.01.2008, 18.01.2008 & 24.01.2008. IT TRANSP IRES THAT THE FIRST AGREEMENT DATED 04.01.2008 WAS ALSO A REGISTERED DO CUMENT. THE ASSESSEE THEREAFTER MADE COMPENSATION PAYMENT IN QUESTION OF RS.10.61CRORES TO M/S. ITA NO. 2518/AHD/2012 & CO NO.29 AHD 2013 ( DCIT VS . SHRI JAGADISHCHANDRA B PATEL) A.Y. 2009-10 - 3 - PRERNA INFRABUILD LTD. IN VIEW OF THE FACT THAT HE HAD NOT BEEN ABLE TO HONOUR HIS FORMER DEVELOPMENT AGREEMENT (SUPRA). THESE TW O PARTIES APPEAR TO HAVE TAKEN RECOURSE TO ARBITRATION PROCEEDINGS. LEARNED ARBITRATOR THEREIN ANNOUNCED HIS AWARD ON 29.04.2008 QUA THE SUM IN QU ESTION OF RS.10.61CRORES. THE PARTIES THEREAFTER ENTERED INT O A TERMINATION AGREEMENT DATED 10.05.2008. THERE IS NO DISPUTE THAT THE ASS ESSEE ALSO MADE PAYMENT OF THE AWARD SUM IN QUESTION. 4. WE NOW COME TO ASSESSMENT ORDER DATED 29.12.2011 . THE ASSESSING OFFICER COMPLETED A REGULAR ASSESSMENT DISALLOWING ASSESSEES CLAIM OF THE ABOVESTATED EXPENDITURE U/S.48(1) OF THE ACT ON THE GROUND THAT THE SAME COULD NOT BE HELD TO BE IN CONNECTION WITH THE SALE OF THE LAND IN QUESTION. HE FURTHER APPEARS TO HAVE RELIED UPON VARIOUS JUDI CIAL PRONOUNCEMENTS IE. VSMR JAGDISHCHANDARAN VS. CIT (1997) 227 ITR 240 ( SC), CIT VS. ATTLI N RAO (2001) 252 ITR 880 (SC), SITANANDA VS. CIT (20 01) 119 TAXMAN 227 (DELHI), ASHOK SOI VS. CIT (2004) 192 CTR 535 (DELH I) ETC. THIS RESULTED IN THE IMPUGNED DISALLOWANCE. 5. THE ASSESSEE PREFERRED APPEAL. LEARNED CIT(A) R EVERSES THE ABOVESTATED DISALLOWANCE BY WAY OF FOLLOWING DISCUS SION: 5.(5.1.) I HAVE PERUSED THE FACTS OF THE CASE AS E NUMERATED BY A.O. AND AS SUBMITTED BY APPELLANT. I HAVE PERUSED THE CASE LAW S RELIED ON BY BOTH A.O. AS WELL AS APPELLANT. AFTER CAREFUL CONSIDERATION OF FACTS, SUBMISSION, RATIO OF CASE LAWS RELIED ON AND CONTENTIONS OF BOTH A.O. AS WELL AS A PPELLANT, THE FOLLOWING ISSUES EMERGES FOR THE MAIN GROUND OF APPEAL. (A) THERE IS NO DISPUTE IN RESPECT OF FACTS AND FIG URES RELATED TO SALE OF LAND IN QUESTION. EVEN THE COMPUTATION OF CAPITAL GAIN WITH INDEXATION IS NOT DISPUTED BY A.O. (B) THERE IS NO DISPUTE IN RESPECT OF VARIOUS AGREE MENTS ENTERED IN TO BY APPELLANT AND ARBITRAGE SETTLEMENT AND ITS AMOUNT. (C) THE OTHER TWO CO-OWNERS RETURN OF INCOME HAS FO LLOWING DETAILS IN THEIR RESPECTIVE RETURN OF INCOME. ITA NO. 2518/AHD/2012 & CO NO.29 AHD 2013 ( DCIT VS . SHRI JAGADISHCHANDRA B PATEL) A.Y. 2009-10 - 4 - (I) SHRI AJAYBHAI HARIBHAI PATEL, PAN: ABXPP1822D F ILED RETURN OF INCOME FOR A.Y. 2009-10 ON 17.12.2009 WITH DY. CIT, CIR-9, AHMEDABAD DECLARING THERE IN TOTAL INCOME OF RS. 13,52,14,894 . THIS INCLUDE LONG TERM CAPITAL GAIN OF RS. 13,46,04,395 AS WORKED OUT IN T HE ANNEXURE ATTACHED WITH COMPUTATION OF INCOME. IT IS EVIDENT THAT NO C OST WAS CLAIMED FOR TRANSFER OF LAND BY THE CO-OWNER IN RESPECT OF IMPU GNED LAND SALE HAVING THE CO-OWNERSHIP OF APPELLANT. (II) SHRI HITENDRA KUMAR BHAILALBHAI PATEL PAN: AFU PP4221K FILED RETURN OF INCOME FOR A.Y. 09-10 ON 30.09.09 DECLARI NG THERE IN TOTAL INCOME OF RS. 6,68,33,280. THIS INCLUDES LONG TERM CAPITAL GAIN FROM SALE OF LAND AT RS. 6,89,28,317. THIS CO-OWNER ALSO NOT CLAIMED ANY COST OF TRANSFER OF LAND. (D) THE APPELLANT'S RETURN OF INCOME FOR A.Y. 03-04 ,04-05,07-08 AND 08-09 WERE ALSO EXAMINED TO VERIFY THE FACTS ABOUT SOURCE S AND PROPER DISCLOSURE OF PURCHASE/ACQUIRING OF SUCH LAND FOR GENUINE CLAIM O F LONG TERM CAPITAL GAIN AND IMPROVEMENT COST. THE A.O. ALSO NOT DISPUTED ANY OF SUCH FACT AND ACCEPTED THE FACTS AND FIGURES RELATED TO SUCH LAND. 5.2. IT IS THEREFORE ONLY DISPUTE IS ABOUT ALLOW AB ILITY OF RS. 10,61,47,415 AS TRANSFER EXPENSES RELATED TO SALE OF LAND ON WHETHE R THE SAME IS COMPENSATION FOR BREACH OF CONTRACT. IT IS IN THIS RESPECT SECTION 4 8(I) OF THE ACT PROVIDE UNDER THE MODE OF COMPUTATION THAT OUT OF THE CAPITAL GAIN AS COMPUTED UNDER SECTION 48 OF THE ACT, DEDUCTION FROM THE FULL VALUE OF THE CONSI DERATION IS TO BE GIVEN FOR ' EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH SUCH TRANSFER'. THE IMPORTANT PHRASES HERE TO BE CONSIDERED ARE ' E XPENDITURE', 'INCURRED', 'WHOLLY AND EXCLUSIVELY' AND ' IN CONNECTION WITH S UCH TRANSFER'. IT IS THEREFORE, THERE SHOULD BE A POSITIVE EXPENDITURE BEING ACTUAL LY INCURRED IS ELIGIBLE FOR SUCH DEDUCTION. THE ALL IMPORTANT PHRASE ' IN CONNECTION WITH SUCH TRANSFER' IS NOT DEFINED BUT HAS TO BE INTERPRETED WITH VARIOUS JUDI CIAL PRONOUNCEMENT. HON'BLE KERALA HIGH COURT IN THE CASE OF V.A. VASUMATHI V C IT (1980) 123 ITR 94 AND IN THE CASE OF CIT VS DR. P RAJENDRAN (1981) 127 ITR 8 10 OBSERVED THAT 'THE WORD' IN CONNECTION WITH SUCH TRANSFER' OCCURR ING IS THAT SECTION MEAN INTRINSICALLY RELATED TO THE TRANSFER. THESE WORDS ARE VERY WIDE IN THEIR AMBIT. THERE IS NO WARRANT FOR IMPORTING A RESTRICTION THA T, TO QUALIFY FOR DEDUCTION, THE EXPENDITURE MUST NECESSARILY HAVE BEEN INCURRED PRI OR TO THE PASSING OF TITLE. IT IS IMMATERIAL WHETHER THE ELIGIBLE EXPENDITURE WAS INC URRED PRIOR OR SUBSEQUENT TO THE PASSING OF TITLE. IN THIS VIEW OF THE MATTER EX PENDITURE INCURRED BY THE ASSESSEE IN CONDUCTING THE LAND ACQUISITION REFERENCE PROCEE DINGS BEFORE THE CIVIL COURT WAS HELD TO BE ELIGIBLE EXPENDITURE U/S. 48(L)(A)(I)'. IT IS IN THIS REGARD HON'BLE BOMBAY HIGH COURTS JUDGMENT IN THE CASE OF CIT V SHAKUNTA LA KANTILAL (SUPRA) HAS LAID THE 3TIO WHERE THE EXPENDITURE TO REMOVE ENCUMBRANC E TO LAND WAS ALLOWED AS DEDUCTION. SUCH ENCUMBRANCE CAN BE RELATED TO TITLE OR OTHERWISE TO EFFECT THE PEACEFUL TRANSFER OF ASSET. HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT V SMT LAXMIDEVI RATANI (2008) 261 ITR 363 HELD THAT 'THE COMPENSATION FOR GIVING UP THE RIGHT TO SPECIFIC PERFORMANCE FOR ANY CONTRACTUAL RIGHT RELATING TO CAPITAL ASSET WOULD BE LIABLE FOR CAPITAL GAIN TAX ' SIMILAR VIEW ARE TAKEN BY OTHER HIGH COURTS I.E. HON'BLE MADRAS HIGH COURT IN K.R. SRINATH V ACIT (2004) 268 ITR 436(MAD), HON'BLE BOMBAY HIGH COURT IN CIT V VIJAY FLEXIBLE CONTAINERS (1990) 186 ITR 693, TATA TELESERVICES LTD. (1980 122 ITR 5 94 AND CIT V STERLING ITA NO. 2518/AHD/2012 & CO NO.29 AHD 2013 ( DCIT VS . SHRI JAGADISHCHANDRA B PATEL) A.Y. 2009-10 - 5 - INVESTMENT CORPORATION LTD. (1980) 123 ITR 441. IT IS THEREFORE, THE COMPENSATION PAID BY APPELLANT FOR BREACH OF DEVELOPMENT RIGHT T O M/S. PRERNA INFRABUILD PVT. LTD CANNOT BE SEPARATED OUT FROM TRANSFER OF LAND S INCE THE SAME RESULT IN TO CAPITAL GAIN IN THE HANDS OF M/S. PRERNA INFRABUILD PVT. LTD. 5.3. THE A.O. RELIED ON THE CASE LAWS WHERE THE ISS UE OF MORTGAGING OF PROPERTY UNDER TRANSFER IS INVOLVED. IN OTHER WORD THERE WAS ALREADY A DEBT ON THE PROPERTY IN THE FORM OF SUCH MORTGAGE AND THE RATIO OF ALMOS T ALL SUCH CASES RIGHTLY HELD THAT REPAYMENT OR DISCHARGE OF SUCH DEBT CANNOT BE A PART OF EXPENDITURE RELATED TO SALE OF LAND. IN FACT IT IS AN APPLICATION OF SUCH SALE CONSIDERATION. THE RATIO ALSO HIGHLIGHT THE EXPENDITURE CHARACTER OF SUCH REPAYME NT/DISCHARGE OF BURDEN AS REVENUE AND NOT AS CAPITAL ON THE CONTRARY IN THE C ASE OF CHATURBHUJ DWARKADAS KAPADIA V CLT(2003) 260 ITR 491, HON'BLE BOMBAY HIG H COURT OBSERVED AND HELD THAT ' DEVELOPMENT AGREEMENT IS NOT AN AGREEME NT FOR SALE, BECAUSE IT IS AN EXECUTORY CONTRACT WITH THE DEVELOPER NOT BEING THE INTENDED PURCHASER, SO THAT NOT FOR SPECIFIC PERFORMANCE SHOULD NOT ORDINARILY LIE ON THE BASIS OF A DEVELOPMENT AGREEMENT, WHICH IS ESSENTIALLY A BUSINESS AGREEMEN T. BUT IN :NE CONTENT OF PREEMPTIVE PURCHASE OF PROPERTY UNDER CHAPTER XX-C, DEVELOPMENT AGREEMENT HAS BEEN UNDERSTOOD TO BE AN AGREEMENT FOR SALE REQUIRI NG NO OBJECTION CERTIFICATE UNDER THIS CHAPTER AS HELD IN ASHOK LEYLAND FINANCE LTD V APPROPRIATE AUTH. (1998) 230 ITR 398 (MAD), ASHISH MUKHERJI VS UNION OF INDIA (1999) 236 ITR 793(DELHI). 5.4. THE ESSENCE OF ARGUMENT OF A.O. THAT APPELLANT HAS DIVERTED CAPITAL GAIN AT SOURCE BY SUCH COMPENSATION CAN BE VIEWED IN THE LI GHT OF RATIO OF HON'BLE SUPREME COURT IN THE CASE OF MISS DHAN DADABHOY KAP ADIA V CIT (1967) 63 ITR 651, WHERE IN IT WAS POINTED OUT THAT THE CAPITAL G AIN HAS TO BE COMPUTED ON THE BASIS OF COMMERCIAL PRACTICE WHICH AN ORDINARY MAN OF BUSINESS WILL ADOPT IN COMPUTATION FOR BUSINESS PURPOSE. THIS CONCEPT IS S OME TIME REFERRED AS THE REAL INCOME CONCEPT. PROBABLY THERE IS NO JUSTIFICATION FOR COMPUTING CAPITAL GAIN ON A DIFFERENT BASIS. ON SUCH A VIEW IT WOULD BE UNNECES SARY TO STRETCH THE CONCEPT OF COST, IMPROVEMENT AND/OR SALE EXPENSES TO COVER SIT UATION WHERE THEY CANNOT POSSIBLY COVER THE SAME, BUT ALL THE SAME ENTITLED TO DEDUCTION TO ARRIVE AT THE TRUE CAPITAL GAIN. SIMILAR VIEWS WERE TAKEN BY ANDHRA PR ADESH HIGH COURT IN THE CASE OF CIT V BILQUIS JAHAN BEGAM (1984) 150 ITR 508 (AP ). HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V DAHIHA RAMANLAL (1992) 1 97 ITR 123 CONSIDERED THESE TEST AND RATIO AND HELD IN FAVOR OF APPELLANT. HON' BLE SUPREME COURT AFFIRMED THIS HON'BLE GUJARAT HIGH COURT JUDGMENT VIDE 93 TAX MAN 423(SC). 5.5. HON'BLE SUPREME COURT IN THE CASE OF R M ARUNA DHALAM V CIT(1997) 227 ITR 222,237 AFFIRMED THE FULL BENCH JUDGMENT OF HON'BLE MADRAS HIGH COURT IN THE CASE OF SMT S. VAILIAMMAI V CLT (1981) 127 ITR 713 IN WHICH HONBLE MADRAS HIGH COURT HELD THAT COST OF MAKING THE TITLE ANA P ERFECT CAN BE TREATED AS THE 'COST OF ACQUISITION'. 5.6 CONSIDERING THE ABOVE DISCUSSED LEGAL PROPOSITI ON, FOLLOWING FACTS OF THE CASE HAS TO BE CONSIDERED. (I) LANDS WERE DISPUTED, AS THE APPELLANT, AS PER C ONDITIONS OF DEVELOPMENT AGREEMENT WAS NOT IN POSITION TO ASSIGN SHARE OF OTHER ITA NO. 2518/AHD/2012 & CO NO.29 AHD 2013 ( DCIT VS . SHRI JAGADISHCHANDRA B PATEL) A.Y. 2009-10 - 6 - CO-OWNERS FOR DEVELOPMENT PURPOSE, AT THE SAME TIME THE CO-OWNERS WERE NET READY TO SALE THEIR SHARE TO THE DEVELOPER . (II) LAND OWNERS GET BETTER PROPOSAL FOR SALE OF L AND END FAST MONEY, FOR WHICH IF WAS MUST FOR APPELLANT TO GET DEVELOPMENT AGREEMENT TERMINATED, SO THAT HE CAN GET CLEAR TITLE AND POSS ESSION OVER THE LAND, TO BE SOLD TO ETHER PARTIES. (III) APPELLANT WAS UNDER DUE PRESSURE OF COMPRO MISE, AS HE KNOWS THAT IN CASE OF LITIGATION AND COURT CASE, THE LAND WILL BE BEYOND HIS CONTROL IN THE NEXT 7-10 YEARS AND THERE WILL BE NO MONEY TILL DECISION OF COURT OF LAW. (IV) TO GIVE DEAR TITLE, POSSESSION AND OWNERSHI P RIGHTS TO BUYERS IN SALE, IT WAS MUST FOR THE APPELLANT TO ARRIVE ON COMPROMI SE TO AVOID DISPUTES AND LITIGATIONS, THEREFORE, THE APPELLANT ACCEPTED ARBITRATION AWARD FOR PAYMENT, OF COMPENSATION OF R S. 10,61 CRORES TO THE DEVELOPER FOR TERMINATION OF DEVELOPM ENT AGREEMENT. 5.7. CONSIDERING THE ABOVE DISCUSSION AND REASONING , I AM INCLINED TO ACCEPT THE CONTENTION OF THE APPELLANT, FROM WHERE, IT IS EVID ENT THAT THE APPELLANT WAS NOT ABLE TO FULFILL THE CONDITIONS OF DEVELOPMENT AGREE MENT AS THE CO-OWNERS WERE NEITHER AGREE TO GIVE THEIR SHARE OF LAND FOR DEVELOPMENT PURPOSE NOR READY TO SALE THEIR PORTION OF LAND TO DEVELOPER. DUE TO THIS, THE DEVELOPMENT AGREEMENT BECOME HURDLE AND DUE TO DEVELOPMENT AGREEMENT, THE LANDS BECOME DISPUTED. TO AVOID SUCH LEGAL JUGGLERIES AND TO HAVE CLEAR AND P EACEFUL TITLE OVER LAND THE APPELLANT AGREED FOR AWARD OF COMPENSATION OF RS. 1 0.61 CRORES FOR REMOVING ENCUMBRANCE ON LAND DUE TO DEVELOPMENT AGREEMENT, S O THAT LAND CAN BE SOLD TO OTHER PARTIES AND IF THE COMPROMISE IS NOT ARRIVE, THERE WILL BE LONG LEGAL LITIGATIONS AND THE LAND WILL BE UNDER DISPUTE FOR YEARS TO COME. THE PURPOSE OF AGREEING TO SUCH AWARD IS FOR SALE LAND WITH CLEAR TITLE AND IN CONNECTION TO SALE OF LAND. IN VIEW OF THE ABOVE, I HOLD THAT THE EXPENDITURE F OR TERMINATION OF DEVELOPMENT AGREEMENT IS IN CONNECTION WITH TRANSFE R OF LAND I.E. SALES. THE A.O. IS DIRECTED TO ALLOW SUCH EXPENSES AS DEDUCTION FROM S ALE PROCEEDS OF LANDS, THE GROUND OF APPEAL OF APPELLANT IS ALLOWED. 5.8. IN RESPECT OF APPELLANT'S CONTENTION (ALTERNAT IVE BY AND WITHOUT PREJUDICIAL) THAT THE SALE AGRICULTURAL LAND DOES NOT LEAD TO CA PITAL GAIN, I AM NOT INCLINED ON THE FACT THAT APPELLANT HIMSELF VOLUNTARILY OFFERED CAPITAL GAIN FROM THESE TRANSACTION AND FAILED TO SUBSTANTIATE HIS GROUND T HAT THESE LAND WERE AGRICULTURAL IAND AS DEFINED IN THE ACT. THEREFORE, THIS CONTENT ION REJECTED. 5.9. IN RESPECT OF ISSUES RELATING TO CHARGING RATE OF TAX ON LONG-TERM CAPITAL GAIN ON SALE OF LAND, I AM INCLINE TO ACCEPT THE CONTENT ION OF THE APPELLANT THAT TAXES ON LONG-TERM CAPITAL GAIN ON SALE OF ASSETS ARE @ 20% I.E. CONCESSIONAL RATE INSTEAD OF HIGHER RATE OF TAX. THE A.O. IS DIRECTED TO CHAR GE CONCESSIONAL RATE OF TAX ON LONG-TERM CAPITAL GAIN ON SALE THE GROUND OF APPEAL OF APPELLANT IS ALLOWED. 5.10 IN RESPECT OF GROUND RELATED TO CHARGING OF IN TEREST U/S.234B AND 234C, THE SAME IS CONSEQUENTIAL IN NATURE. THE A.O. IS DIREC TED TO CHARGE IF REQUIRED AFTER APPEAL EFFECT. ITA NO. 2518/AHD/2012 & CO NO.29 AHD 2013 ( DCIT VS . SHRI JAGADISHCHANDRA B PATEL) A.Y. 2009-10 - 7 - 6. WE HAVE HEARD BOTH THE PARTIES. CASE FILE PERUS ED. SHRI R. I. PATEL (CIT-DEPARTMENTAL REPRESENTATIVE/1) REPRESENTS THE REVENUE. HE FIRST OF ALL INVITES OUR ATTENTION TO THE REVENUES PETITION DAT ED 09.07.2014 ALONGWITH A COVERING LETTER CONTAINING THE ASSESSING OFFICERS REQUEST OF ADDITIONAL EVIDENCE. THE LATTER PETITION MOVED FROM ASSESSIN G OFFICERS END DATED 05.06.2014 PLEADS AS UNDER: NO.CIT-IV/TECH./ITAT/JBP/2014-15 DATE : 05/06/2014 TO, THE COMMISSIONER OF INCOME-TAX ITAT-I, AHMEDABAD SIR, SUB: ADMISSION OF ADDITIONAL EVIDENCES IN APPELL ATE PROCEEDINGS BEFORE HON'BLE ITAT IN THE CASE OF SHRI JAGDISHCHANDRA BHA IIALBHAI PATEL FOR A.Y. 2009-10 - REGARDING WITH REFERENCE TO THE APPEAL FILED IN THE ABOVE CAS E FOR A.Y, 2009-10 AT ITA NO. 2518/AHD/2012, I AM DIRECTED TO ENCLOSE HEREWIT H LETTER NO.DCIT/CIRCLE- 9/ITAT/JBP/2014-15 DATED 29/05/2014 OF DY. CIT, CIR !CE-9, AHMEDABAD AND LETTER NOJCIT/RANGE-9/ITAT/JAGDISH B PATEL/2014-15 DATED 03/06/2014 . 2. AS REPORTED BY ASSESSING OFFICER AND THE RANGE H EAD IN THEIR REPORTS, IN THIS CASE THE ASSESSEE FILED RETURN OF INCOME SHOWI NG INCOME UNDER THE HEAD LONG TERM CAPITAL GAIN OF RS. 4,56,35,583/- ON ACCOUNT O F SALE OF LAND AT SARKHEJ WHICH WAS SOLD TO M/S. APPLE WOODS ESTATE PVT. LTD. FOR A TOTAL CONSIDERATION OF RS. 16,08,69,914/-. AGAINST THE SALE PROCEEDS, ASSESSEE HAD CLAIMED TRANSFER EXPENSES OF RS. 10,61,47,415/- WHICH THE ASSESSING OFFICER D ISALLOWED ON THE GROUND THAT THE COMPENSATION PAID TO M/S. PRERNA INFRABUILD LTD FOR TERMINATION OF DEVELOPMENT AGREEMENT DATED 30/03/2007 IN CONSEQUEN CE TO THE ARBITRATION PROCEEDINGS BY WAY OF AN AWARD DATED 29/04/2008 WHI CH WAS DISALLOWED BY THE ASSESSING OFFICER AS THE SAID COMPENSATION IS NOT C ONNECTED WITH THE SALE OF LAND. 3. THE CIT(A) DELETED THE DISALLOWANCE ON THE GROUN D THAT THE TRANSFER EXPENSES WERE IN THE NATURE OF EXPENSES FOR BETTERM ENT OF TITLE AND HENCE ALLOWABLE AS DEDUCTION AGAINST INCOME OFFER TO TAX UNDER THE HEAD CAPITAL GAIN. THE DEPARTMENT DID NOT ACCEPT THE AFORESAID| OF CIT(A) AND FILED APPEAL TO ITAT AS MENTIONED ABOVE, WHICH IS PENDING AS ON DATE. 4. HOWEVER, DEPARTMENT HAS BEEN ABLE TO UNRAVEL THE MODUS OPERAND! OF THIS ASSESSEE AS WELL AS HIS FAMILY MEMBERS TO CLAIM SUC H EXPENSES ON THE BASIS OF FALSE ITA NO. 2518/AHD/2012 & CO NO.29 AHD 2013 ( DCIT VS . SHRI JAGADISHCHANDRA B PATEL) A.Y. 2009-10 - 8 - AND FABRICATED DOCUMENTARY EVIDENCE OF DEVELOPMENT AGREEMENT, ITS CANCELLATION AND SUBSEQUENT ARBITRATION PROCEEDINGS AND ARBITRAT ION AWARD. 4.1. DURING THE COURSE OF THE PROCEEDINGS U/S.263 O F THE ACT IN THE CASE OF DHARA JAGDISHCHANDRA PATEL (DAUGHTER OF ASSESSEE) F OR A.Y. 2009-10 WHEREIN CLAIM OF EXPENSES AMOUNTING TO RS. 3,81,58,013/- HA D BEEN MADE AGAINST INCOME UNDER THE HEAD CAPITAL GAIN. THE OTHER FACTS WERE E XACTLY SIMILAR TO THE ASSESSEE'S CASE I.E. ENTERING INTO DEVELOPMENT AGREEMENT WITH ONE PRERNA INFRABUILD LTD AND ITS CONSEQUENT TERMINATION, INVOKING OF ARBITRATION PROCEEDINGS AND ARBITRATION AWARD. THE DEVELOPMENT AGREEMENT AND OTHER DOCUMENT ARY EVIDENCES SUCH AS ARBITRATION AGREEMENT, TERMINATION AGREEMENT ETC WE RE SIGNED BY ASSESSEE ON ONE HAND (BOTH IN HIS INDIVIDUAL CAPACITY AND AS FATHER OF DHARA J. PATEL) AND ONE SHRI TUSHAR S SHAH ANOTHER HAND ON BEHALF OF PRERNA INFR A BUILD LTD. THE ARBITRATION PROCEEDINGS AS PER THE AWARD WHERE ADJUDICATED BY O NE SHRI JASUBHAI D PATEL IN BOTH CASES. ASSESSEE FURTHER PLACED ON RECORD EVIDE NCE OF SUBSEQUENT PAYMENT OF COMPENSATION FROM ITS BANK ACCOUNT. 4.2. DURING THE COURSE OF PROCEEDINGS U/S.263 OF TH E ACT, IT WAS DETECTED THROUGH CROSS-VERIFICATION FROM THE ASSESSMENT RECO RDS OF PRERNA INFRA BUILD LTD THAT THE SAID COMPANY HAD/ NOT SHOWN ANY RECEIPT IN THIS REGARD FROM DHARA J. PATEL. IN CONSEQUENCE TO THE AFORESAID FACT COMING TO FORE STATEMENT OF SHRI VIJAY SHAH, CHAIRMAN OF M/S. PRERNA INFRA BUILD LTD WAS R ECORDED U/S.131 OF THE ACT BY DY.CIT, CIRCLE-5, AHMEDABAD IN WHICH HE CATEGORICAL LY MENTIONED THAT SHRI TUSHAR SHAH (SIGNATORY TO THE DEVELOPMENT AGREEMENT , TERMINATION AGREEMENT ETC ON BEHALF PRERNA INFRA BUILD LTD N THE CAPACITY OF DIRECTOR HAD NEVER BEEN AN EMPLOYEE OR DIRECTOR OF M/S. PRERNA INFRA BUILD LTD NOR AUTHORIZED BY THE COMPANY AT ANY POINT OF TIME TO ENTER INTO ANY AGRE EMENT WITH ASSESSEE OR HIS DAUGHTER WITH RESPECT TO DEVELOPMENT OF THEIR LAND AT SHARKHEJ. SHRI VIJAY SHAH CHAIRMAN AND MANAGING DIRECTOR, PRERNA INFRA BUILD LTD ALSO DENIED TO HAVE RECEIVED ANY AMOUNT FROM EITHER DHARA J. PATEL OR S HRI JAGDISHCHANDRA B. PATEL IN PERFORMANCE OF ARBITRATION AWARD. FURTHER, SHR I VIJAY SHAH STATED THAT THE AMOUNT BY HIM FROM ASSESSEE AMOUNTED TO RS. 7.85 CR ORES ONLY AND NOT RS. 10,61,47,415/- AS BY ASSESSEE AND THE SAID PAYMENT OF RS. 7.85 CRROES PE RTAINED TO DIFFERENT TRANSACTION NOT RELATED TO ANY ARBITRATIO N AWARD. FINALLY SHRI VIJAY SHAH HAS STARTED THAT BALANCE OF RS. 2.76 CRORES CL AIMED TO HAVE BEEN PAID BY ASSESSEE BY WAY OF CHEQUES TO AXIS BANK RS.15,00,00 0/-, RS. 2,00,00,000/- AND RS. 61,47,415/- HAD NEVER BEEN RECEIVED BY THE COMPANY PRERNA INFRA BUILD LTD. THE RELEVANT PORTION OF STATEMENT RECORDED FROM SHRI VI JAY SHAH ARE REPRODUCED IN DCIT, CIRCLE-9 AND JT.CIT, RANGE-9, A'BAD'S ABOVE R EFERRED LETTER. 5. IN VIEW OF ABOVE FACTS AS REPORTED BY THE ASSESS ING OFFICER AND THE RANGE HEAD, IT IS PROVED BEYOND DOUBT THAT THE CLAIM OF A SSESSEE FOR DEDUCTION ON ACCOUNT OF PAYMENT OF COMPENSATION RS. 10,61,47,415 /- TO PRERNA INFRA BUILD LTD FOR TERMINATION OF DEVELOPMENT AGREEMENT IS BASED O N FALSE AND FABRICATED DOCUMENTS WITH A VIEW TO EVADE TAX. THEREFORE, AS P ROPOSED BY THE ASSESSING OFFICER AND RANGE HEAD, HON'BLE ITAT MAY BE PRESENT ED WITH THESE ADDITIONAL EVIDENCE AND FACTS WITH A REQUEST TO RESTORE BACK T HE MATTER TO THE FILE OF CIT(A) FOR PROPER AND FURTHER INQUIRY IN THIS CASE. ITA NO. 2518/AHD/2012 & CO NO.29 AHD 2013 ( DCIT VS . SHRI JAGADISHCHANDRA B PATEL) A.Y. 2009-10 - 9 - 7. SHRI PATEL ACCORDINGLY CONTENDS THAT THE ASSESSE ES HANDS ARE NOT CLEAN IN VIEW OF THE FACT THAT THE LD. CIT HAS BEEN ABLE TO BUST HIS MODUS OPERANDI OF CLAIMING FALSE COMPENSATION EXPENSES IN QUESTION . THE SAID CIT III, AHMEDABADS ORDER DATED 29.03.2014 PASSED IN ASSESS EES DAUGHTER MS. DHARA JAGDISHCHANDRA PATELS CASE INVOLVING A VERY MUCH AN IDENTICAL PAYMENT MADE TO M/S. PRERNA INFRABUILD (SUPRA) IS A LSO PLACED ON RECORD. SHRI PATEL QUOTES THE SAME TO VEHEMENTLY OPPOSE THE ASSESSEES CLAIM OF EXPENDITURE AS LEARNED CIT HELD THEREIN THAT NO PAY MENT WAS MADE TO THE ABOVE PAYEE ENTITY AS PER STATEMENT OF ITS AUTHORIZ ED PERSON SHRI VIJAY C. SHAH AS RECORDED IN THE COURSE OF SECTION 263 PROCE EDINGS. LEARNED DEPARTMENTAL REPRESENTATIVE THEREFORE STRONGLY ARG UES THAT THE ASSESSEE HAS RAISED A FRAUDULENT CLAIM OF EXPENDITURE IN QUESTIO N. HE THUS SEEKS TO RESTORE ASSESSING OFFICERS FINDINGS. 8. WE HAVE CONSIDERED REVENUES AVERMENTS IN ITS AB OVESTATED PETITION. IT IS NOT IN DISPUTE THAT THE ASSESSING OFFICER NEV ER DOUBTED THE ASSESSEE TO HAVE MADE THE IMPUGNED PAYMENT IN THE NATURE OF COM PENSATION TO M/S. PRERNA INFRABUILD IN FURTHERANCE TO THE ABOVESTATED ARBITRATION AWARD. HIS MAIN GROUND TAKEN IN ASSESSMENT ORDER FOR DISALLOW ING THE IMPUGNED EXPENDITURE CLAIM U/S.48(1) OF THE ACT IS THAT THE SAME IS NOT ADMISSIBLE SINCE NOT CONNECTED WITH TRANSFER OF THE LAND IN QUESTION . IT IS ALSO EVIDENT THAT THE CIT(A)S ORDER UNDER CHALLENGE IS DATED 13.08.2012 WHEREAS THE CITS ORDER (SUPRA) IS DATED 29.03.2014 IN FURTHERANCE TO HIS S HOW CAUSE NOTICE ISSUED ON 18.07.2013. WE OBSERVE IN THESE PECULIAR FACTS THA T SECTION 263 EXPLANATION 1(C) STIPULATING THAT CITS JURISDICTION DOES NOT E XTEND TO THOSE MATTERS WHICH HAS BEEN CONSIDERED AND DECIDED IN AN APPEAL; SQUAR ELY APPLIES HERE. WE REITERATE THAT ALTHOUGH THE ASSESSEE IS NOT THE SAM E IN THE ABOVE CITS ORDER AND CIT(A)S ORDER UNDER CHALLENGE, STILL WE HOLD T HAT FORMERS FINDINGS WOULD NOT HAVE MATTERED AT THIS STAGE EVEN IF THE A SSESSEE WERE THE SAME. IT ITA NO. 2518/AHD/2012 & CO NO.29 AHD 2013 ( DCIT VS . SHRI JAGADISHCHANDRA B PATEL) A.Y. 2009-10 - 10 - FURTHER TRANSPIRES THAT THE CITS ORDER HEREINABOVE STANDS REVERSED IN SAID ASSESSEES APPEAL ITA NO.1116/AHD/2014 WITH DETAILE D OBSERVATIONS THAT PAYMENT TO M/S. PRERNA INFRABUILD STOOD DULY PROVED BY WAY OF BANKING CHANNEL. WE THEREFORE FIND NO MERIT IN REVENUES AB OVE PETITION SEEKING TO PLACE RELIANCE UPON CITS ORDER (SUPRA). WE THUS PROCEED TO ADJUDICATE THE REVENUES SOLE SUBSTANTIVE GROUND ON THE BASIS OF T HE MATERIAL ALREADY ON RECORD. 9. WE NOW COME TO LEARNED DEPARTMENTAL REPRESENTATI VE ARGUMENT THAT THE IMPUGNED EXPENDITURE OF RS.10.61CRORES IS NOT A LLOWABLE U/S.48(I) OF THE ACT SINCE NOT INCURRED WHOLLY AND EXCLUSIVELY INCUR RED IN CONNECTION WITH THE TRANSFER IN QUESTION. WE WISH TO MENTION HERE THAT THE ASSESSEE DECLARED LONG TERM CAPITAL GAINS IN THE IMPUGNED ASSESSMENT YEAR AMOUNTING TO RS.4,56,35,583/- AND RAISED THE IMPUGNED CLAIM OF T RANSFER EXPENSES OF RS.10.61CRORES. LEARNED DEPARTMENTAL REPRESENTATIV E REITERATES THE ABOVESTATED CASE LAW TO FORTIFY ASSESSING OFFICERS FINDINGS. WE HOWEVER FIND NO MERIT THEREIN. IT IS EVIDENT THAT HONBLE SUPREME COURTS DECISION IN JAGDISHCHANDRANS CASE (SUPRA) PERTAINED TO A MORTG AGE DEED WHICH IS NOT THE CASE HERE. SAME IS THE FACT INVOLVED IN SAID HONB LE COURTS SECOND DECISION IN A ATTILI N. RAOS CASE (SUPRA). THIRD DECISION IN SITA NANDAS CASE (SUPRA) HOLDS THAT AN EXPENDITURE UNDER THE ABOVE STATUTORY PROVISION HAS TO BE WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANS FER. WE KEEP IN MIND THE SAME TO ONCE AGAIN REVERT BACK TO FACTS NARRATED IN PRECEDING PARAGRAPH WHEREIN IT STANDS PROVED THAT THE ASSESSEE HAS PAID THE IMPUGNED COMPENSATION FOR HAVING NOT BEEN ABLE TO PERFORM HI S OBLIGATION IN DEVELOPMENT AGREEMENT DATED 30.03.2007 AS FOLLOWED BY SUBSEQUENT ARRANGEMENT FETCHING HUGE PROFITS BY WAY OF LONG TE RM CAPITAL GAINS. IT HAS FURTHER COME ON RECORD THAT THE ASSESSEE MADE THE I MPUGNED PAYMENT IN FURTHERANCE TO AN ARBITRATION AWARD HAVING VERY MUC H A LEGAL SANCTITY UNDER ITA NO. 2518/AHD/2012 & CO NO.29 AHD 2013 ( DCIT VS . SHRI JAGADISHCHANDRA B PATEL) A.Y. 2009-10 - 11 - ARBITRATION LAW. IT IS EVIDENT FROM THE PAPER BOOK THAT HONBLE BOMBAY HIGH COURT IN CIT VS. SHAKUNTALA KANTILAL (1991) 190 ITR 56 (BOMBAY) ALLOWS VERY MUCH A SIMILAR CLAIM OF EXPENDITURE BY HOLDING THE SAME TO BE IN CONNECTION WITH THE TRANSFER IN QUESTION U/S.48(I) OF THE ACT. WE FIND THAT THE ASSESSEE THEREIN HAD ENTERED INTO AN AGREEMENT. THE VENDEE CONCERNED FILED A SUIT. THE ASSESSEE PAID THE SUM IN QUESTION TO THE EARLIER VENDEE. HE THEREAFTER SOLD THE VERY PROPERTY TO ANOTHER VENDEE . THIS FOLLOWED IDENTICAL CLAIM OF EXPENDITURE WHICH WAS ALLOWED BY HONBLE H IGH COURT. WE MAKE IT CLEAR THAT THE CASE RECORDS CONTAIN A LONG COMPILAT ION OF JUDICIAL PRECEDENTS IN THE VERY DIRECTION. WE HOWEVER CONCLUDE THAT THE S AME ARE NOT QUOTED FOR THE SAKE OF BREVITY. THE GIST THAT FLOWS THEREFROM IS THAT SUCH AN EXPENDITURE COMES U/S.48(I) OF THE ACT. WE FURTHER DEEM IT APP ROPRIATE TO OBSERVE THAT THE ASSESSING OFFICERS CASE LAW (SUPRA) PERTAINS TO MO RTGAGES ONLY WHICH IS NOT FOUND RELEVANT SINCE FACTS OF THE INSTANT CASE INVO LVE AT DEVELOPMENT AGREEMENT CREATING A CLEAR CUT ENCUMBRANCE IN FAVOU R OF THE DEVELOPER WHO HAS BEEN PAID THE COMPENSATION IN QUESTION. WE THU S ARE OF THE VIEW THAT THE ASSESSING OFFICERS ACTION PLACING RELIANCE UPON TH E ABOVE QUOTED DECISIONS IS NOT SUSTAINABLE. WE ACCORDINGLY CONCLUDE THAT T HE LEARNED CIT(A) HAS RIGHTLY DELETED THE IMPUGNED DISALLOWANCE AFTER A V ERY DETAILED DISCUSSION EXTRACTED HEREINABOVE. THE REVENUES SOLE SUBSTANT IVE GROUND AS WELL AS MAIN APPEAL ITA NO.2518/AHD/12 FAILS. 10. WE NOW COME TO ASSESSEES CROSS OBJECTION CO NO .29/AHD/13. MR. DHIREN SHAH SUBMITS FIRST OF ALL THAT ASSESSEES AV ERMENTS THEREIN SUPPORT CIT(A)S ORDER DELETING THE IMPUGNED DISALLOWANCE. HE THEN URGES US TO COME TO PARA 5.8 OF THE LOWER APPELLATE ORDER REJEC TING ASSESSEES CONTENTION THAT THE LAND IN QUESTION WAS NOT A CAPITAL ASSET U /S.2(14) OF THE ACT BEING AGRICULTURAL IN NATURE SO AS TO GIVE RISE TO LONG T ERM CAPITAL GAINS. AFTER ARGUING FOR SOMETIME ON THIS ASPECT, HE WISHES TO N OT PRESS FOR THIS PLEA IN ITA NO. 2518/AHD/2012 & CO NO.29 AHD 2013 ( DCIT VS . SHRI JAGADISHCHANDRA B PATEL) A.Y. 2009-10 - 12 - VIEW OF OUR FINDINGS ON MERITS. WE THUS ORDER THE ASSESSEES INSTANT CROSS OBJECTION TO HAVE BEEN RENDERED INFRUCTUOUS. 11. THIS REVENUES APPEAL IS DISMISSED AND ASSESSEE S CROSS OBJECTION IS DISMISSED AS RENDERED INFRUCTUOUS. [PRONOUNCED IN THE OPEN COURT ON THIS THE 16 TH DAY OF MAY, 2017.] SD/- SD/- ( AMARJIT SINGH ) (S. S. GODARA ) ACCOUNTANT MEMBER JUDICI AL MEMBER AHMEDABAD: DATED 16/05/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0