AKSHAT DEVELOPERS, MUMBAI V. DCIT CIR 12(2), MUMBAI

ITA 292/MUM/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 6016 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 13-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PADMA RAM
• Keywords: Business income; Cost of acquisition
• Section: 143(3); 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 292 /MUM/201 7 ASSESSMENT YEAR : 20 11 - 1 2 AKSHAT DEVELOPERS ( CONVERTED INTO B ELLISSIMO AKSHAT DEVELOPERS PVT LTD AND SUBSEQUENTLY MERGED WITH LODHA BUILDERS PVT LTD ) , 412, FLOOR - 4, 17G VARDHAMAN CHAMBER, CAWASJI PATEL ROAD, HORNIMAN CIRCLE, FORT, MUMBAI [PAN : AA IFA 9274 E ] VS. D CIT, CIRCLE - 12(2) , MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MA DHUR AGGARWAL, AR RESPONDENT BY : SHRI PADMA RAM, DR DATE OF HEARING : 1 0 - 1 2 - 2018 DATE OF PRONOUNCEMENT : 31 - 12 - 2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) - 28 , MUMBAI , DATED 18 - 1 0 - 201 6 . ITA NO. 292 /MUM/ 20 17 : 2 : 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL IS AGAINST THE ORDER OF CIT(A), DISALLOWING RS. 15,49,812/ - BEING PROPORTIONATE COST OF ACQUISITION OF RIGHTS IN LAND MEASURING ADMEASURING 6,085 SQ. METERS OUT OF THE TOTAL LAND OF 8,831 SQ. METERS FOR WHICH THE ASSESSEE HAS RIGHTS. 3 . THE FACTS IN BRIEF ARE THAT, DURING THE YEAR, ASSESSEE HAS DERIVED INCOME FROM RECEIPT OF COMPENSATION ON SURRENDER OF DEVELOPMENT RIGHTS, WHICH WERE ACQUIRED BY THE ASSESSEE VIDE DEVELOPMENT AGREEMENT DT. 21 - 07 - 2003 WITH THE LANDLORD FOR JOINT DEVELOPMENT OF PROPERTY AT POWAI. THEREAFTER, THE OWNER OF THE LAND ALSO EXECUTED ANOTHER DEVELOPMENT AGREEMENT FOR THE SAME LAND WITH M/S. SHREEPAL REALTY PRIVATE LIMITED ON 16 - 06 - 2006 . THE MATTER WAS TAKEN TO HON'BLE HIGH COURT OF BOMBAY BY M/S. SHREEPAL REALTY PRIVATE LIMITED , SEEKING POSSESSION OF PROPERTY INVOLVED . T HEREAFTER ON THE BASIS OF CONSENT TERMS IN SUIT NO. 2417 OF 2006 DT. 23 - 08 - 2010, ASSESSEE - FIRM AGREED TO HANDOVER THE POSSESSION OF PROPERTY INVOLVED TO M/S. SHREEPAL REALTY PRIVATE LIMITED ON THE PAYMENT OF COMPENSATION OF RS. 8 CRORES. ON THE SAID COMPEN SATION, ASSESSEE CALCULATED BUSINESS INCOME OF RS.6 ,57,02,472/ - , AFTER DEDUCTING WORK - IN - PROGRESS ITA NO. 292 /MUM/ 20 17 : 3 : RS.87,91,043/ - AND ADMINISTRAT IVE EXPENSES OF RS.55,06,485/ - . IN THE CONSENT TERMS DT.23 - 08 - 2010, ASSESSEE HAS SURRENDERED LA ND ADMEASURING 6,085 SQ. METERS, OUT OF THE TOTAL LAND OF 8,831 SQ. METERS, WHICH WAS AGREED TO BE DEVELOPED BY ASSESSEE FROM THE DEVELOPMENT AGREEMENT DT. 21 - 07 - 2003. ACCORDING LY, ASSESSEE WAS ISSUED SHOW CAUSE NOTICE BY THE AO AS TO WHY THE EXPENSES PROPORTIONATE TO SURRENDER OF LAND OF 6,085 SQ. METERS SHOULD BE ALLOWED AS DEDUCTION FROM COMPENSATION AND EXPENSES PERTAINING TO REMAINING 2,750 SQ. METERS SHOULD NOT BE DISALLOWED, WHICH WAS REPLIED BY ASSESSEE VIDE LETTER DT. 20 - 03 - 2014 SUBMITTING THAT THE ASSESSEE - FIRM HA VE NOT HA D ANY RIGHT S OVER 2745.50 SQ. METR E S OF LAND AS IT WAS ALREADY SOLD BY THE LANDLORD TO M/S. CHEMTROLS ENGINEERING PVT. LTD., BE FORE EXECUTING THE DEVELOPMENT AGREEMENT WITH ASSESSEE ON 21 - 07 - 2003. 3 .1. FINALLY, LD.AO NOT FINDING THE REPLY OF ASSESSEE AS TENABLE, PARTLY ALLOWED THE COST OF ACQUISITION TO THE TUNE OF RS. 33,45,188/ - OUT OF RS. 48.95 LAKHS AND DISALLOWED THE COST OF ACQUISITION OF RS. 15,49,812/ - PERTAINING TO THE REMAINING LAND OF RS. 2,750 SQ. METERS, WHICH WAS NOT WITH ITA NO. 292 /MUM/ 20 17 : 4 : THE ASSESSEE AT ALL BY FRAMING ASSESSMENT VIDE LETTER DT. 24 - 03 - 2014 U/S. 143(3) OF THE ACT. 4 . IN THE APPELLATE PROCEEDINGS, CIT(A) ALSO UPHELD THE ORDER OF AO BY OBSERVING THAT THE HON'BLE HIGH COURT HAS DIRECTED THE COMPENSATION TO BE PAID TO THE APPELLANT ONLY IN RESPECT OF THE LAND, WHICH WAS TO BE HANDED OVER TO M/S. SHREEPAL REALTY PRIVATE LIMITED I.E., 6085.5 SQ. METERS AND THAT THE ORDER OF HON'BLE HIGH COURT HAS NOTHING TO DO WITH THE BALANCE LAND. 5 . AFTER HEARING BOTH THE SIDES, PERUS ING THE MATERIAL ON RECORD, INCLUDING THE IMPUGNED ORDER , WE FIND THAT THE ASSESSEE ENTERED INTO A JOINT DEVELOPMENT AGREEMENT OF PROPERTY (LAND) WITH LANDLORD ON 21 - 07 - 2003, A COPY OF WHICH IS ATTACHED IN PG. NOS.72 TO 92 OF THE PAPER BOOK. AS PER THE SAID DEVELOPMENT AGREEMENT, ASSESSEE WAS TO DEVELOP A TOTAL LAND MEASURING 8831 SQ. METERS , OUT OF WHICH 2750 SQ. METERS OF LAND WAS ALREADY SOLD BY THE OWNER OF THE LAND TO M/S. CHEMTROLS ENGINEERING PVT. LTD., AND THE SAID LAND WAS TO BE GIVE N TO ASSESSEE FOR DEVELOPMENT FROM THE SAID PARTY BY THE LANDLORD WHO CONTRACTED WITH THE ASSESSEE FOR ITA NO. 292 /MUM/ 20 17 : 5 : DEVELOPMENT OF LAND . THIS HAS BEEN MENTIONED IN THE DEVELOPMENT AGREEMENT I N PG. NO.2 OF THE DEVELOP MENT AGREEMENT. I N TERMS OF THE SAID DEVELOPMENT AGREEMENT, IT IS STATED IN PARA 1 OF THE DEVELOPMENT AGREEMENT THAT T HE ASSESSEE WAS TO PAY THE DEVELOPER RS. 2 CRORES, OUT OF WHICH RS. 10 LAKHS WAS PAID WITH THE SIGNING OF THIS DEVELOPMENT DEED. THE PARA 2 OF THE TERMS AND CONDITIONS PROVIDES THAT RS. 1 CRORE WAS TO BE PAID WHEN NO OBJECTION (NOC) FROM COMPETENT AUTHORI TY UNDER U RBAN L AND ACT, 1976 WAS TO BE GIVEN AND RS. 90 LAKHS UPON COMPLETION OF PROJECT IN THE MANNER AS HAS BEEN MENTIONED IN THE LATER PART OF THE SAID AGREEMENT. HOWEVER, THIS DEVELOPMENT AGREEMENT NEVER P ERFORMED AND ASSESSEE DID NOT PAY MORE THAN RS. 10 LAKHS WHICH WAS PAID INITIALLY AS THE REMAINING PAYMENT WAS WITHHELD BY THE ASSESSEE. IN TERMS OF CLAUSE - 5 OF THE DEVELOPMENT AGREEMENT, THE OWNER SHALL OBTAIN A REQUISITE CO - OPERATION, CONSENT AND CONFI RMATION OF M/S. CHEMTROLS ENGINEERING PVT. LTD., FOR THE PURPOSE OF DEVELOPMENT OF THE SAID PROPERTY, WHICH WAS NEVER OBTAINED AND MADE AVAILABLE TO THE ASSESSEE MEANING THEREBY THAT ASSESSEE, WAS GIVEN POSSESSION OF ONLY 6,035 SQ. METERS OF LAND OUT OF 8, 831 SQ. ITA NO. 292 /MUM/ 20 17 : 6 : METERS OF LAND. WE FIND MERIT IN THE CONTENTION S OF LD. AR THAT WHATEVER EXPENSES INCURRED BY THE ASSESSEE ON THE ACQUISITION OF THE LAND WAS ONLY QUA LAND ADMEASURING 6,035 SQ. METERS AND NOT IN RESPECT OF THE ENTIRE LAND AND THUS ALLOWING THE COST OF ACQUISITION PARTLY TO THE TUNE OF RS. 33,45,188/ - AS AGAINST RS. 48,95,000/ - , WHICH WAS IN FACT THE COST OF ACQUISITION OF 6,035 SQ. METERS OF LAND IS NOT CORRECT AND CANNOT BE SUSTAINED. LD. DR RELIED ON THE ORDER OF CIT(A) BUT COULD NOT PROVE THAT THE ASSESSEE HAS TAKEN POSSESSION OF 8831SQ. MTRS OF LAND. ACCORDINGLY, WE DIRECT THE AO TO DELETE THE ADDITION OF RS. 15,49,812/ - . GROUNDS OF ASSESSEE ARE ALLOWED. 6 . IN THE RESULT, THE APPEAL OF ASSESSEE I S ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DAY OF DECEMBER, 2018 SD/ - SD/ - (MAHAVIR SINGH) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI; / DATED : 31 ST DECEMBER, 2018 TNMM ITA NO. 292 /MUM/ 20 17 : 7 : / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) , MUMBAI 4. / CIT , MUMBAI 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, //TRUE COPY// / (DY./ASST. REGISTRAR) , / ITAT, MUMBAI