Dy.Commissioner of Income Tax, Circle-3(1)(1), Ahmedabad V. M/s. Popular Estate Management Ltd., Ahmedabad

ITA 3116/AHD/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8562 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 04-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Capital receipt
• Section: 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S. S. GODARA, JUDICIAL MEMBER) ITA. NO: 3116/AHD/2015 & C.O. NO. 206/AHD/15 (ASSESSMENT YEAR: 2008-09) DCIT, CIRCLE-3(1)(1), AHMEDABAD M/S. POPULAR ESTATE MANAGEMENT LTD. 81, NEW YORK TOWER-A OPP. MUKTIDHAM DRESAR, S.G., HIGHWAY, THALTEJ CROSS ROAD, AHMEDABAD-380054 V/S V/S M/S. POPULAR ESTATE MANAGEMENT LTD. 81, NEW YORK TOWER-A OPP. MUKTIDHAM DRESAR, S.G., HIGHWAY, THALTEJ CROSS ROAD, AHMEDABAD-380054 DCIT, CIRCLE-3(1)(1), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AABCM0617P APPELLANT BY : SHRI MUDIT NAGPAL, SR. D. R. RESPONDENT BY : SHRI DHIREN SHAH, A.R. ( )/ ORDER DATE OF HEARING : 03 -04-201 8 DATE OF PRONOUNCEMENT : 04-04-2018 ITA NO. 3316 & C.O. 206/AHD/2015 . A.Y. 2008-09 2 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-9, AHM EDABAD DATED 02.09.2015 PERTAINING TO A.Y. 2008-09. 2. THE APPEAL AND THE CROSS OBJECTION WERE HEARD TOGET HER AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. THE GRIEVANCE OF THE REVENUE READS AS UNDER:- 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.5,40,00,000/- MADE ON ACCOUNT OF RECEIPT FOR REL INQUISHMENT OF RIGHT TO SUE THE PARTY WAS TREATED AND TAXED AS BUSINESS INCOME AS AGAINST CAPITAL RECEIPTS SHOWN BY THE ASSESSEE. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS BY NOT APPRECIATING THE FACTS THAT IN THE ASSESSEE'S OWN CASE FOR A.Y. 2009-10 THE THEN L D. CIT(A)-XI, AHMEDABAD VIDE ORDER NO. CIT(A)-XI/347/WD-5(2)/LL-12 DATED 19/11/2 013 CONFIRMED THE ADDITION HOLDING THAT RELINQUISHMENT OF RIGHTS WAS INCOME FR OM BUSINESS OPERATION AND CONDITION FOR DEVELOPMENT AGREEMENT HAS TO BE TAXAB LE BUSINESS INCOME. 4. A PERUSAL OF THE AFOREMENTIONED GRIEVANCE OF THE RE VENUE SHOWS THAT THE LD. CIT(A) ERRED IN NOT FOLLOWING THE ORDER OF HIS PRED ECESSOR FOR A.Y. 2009-10. 5. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE ORDER OF THE TRIBUNAL IN ITA NO. 212/AHD/2014 DATED 29.08.2017 BY WHICH T HE TRIBUNAL HAS SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECTED T HE A.O. TO DELETE THE IMPUGNED ADDITION. ITA NO. 3316 & C.O. 206/AHD/2015 . A.Y. 2008-09 3 6. NO DISTINGUISHING FACT HAS BEEN BROUGHT ON RECORD. A PERUSAL OF THE ORDER OF THE AUTHORITIES BELOW SHOW THAT FACTS ARE IDENTICA L TO THE FACTS OF A.Y. 2009-10 AND ON FINDING PARITY OF THE FACTS OF THE CASE IN H AND VIS--VIS FACTS OF A.Y. 2009-10. WE ARE INCLINED TO FOLLOW THE FINDINGS OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR A.Y. 2009-10 IN ITA NO. 212 /AHD/2014. THE RELEVANT FINDINGS OF THE CO-ORDINATE BENCH READ AS UNDER:- 16. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO R IVAL SUBMISSIONS. WE HAVE ALSO PERUSED THE RELEVANT CASE RECORD WITH ABL E TO ASSISTANCE OF BOTH THE LEARNED COUNSEL. THE DISPUTE BETWEEN THE PARTIES I S QUA TREATMENT OF COMPENSATION RECEIPT IN QUESTION AMOUNTING TO RS.3. 87CRORES. THE ASSESSEES CASE IS THAT IT IS A CAPITAL RECEIPT NOT TAXABLE AS BUSINESS INCOME OR CAPITAL GAINS. THE REVENUE ON THE OTHER HAND DRAWS SUPPORT FROM BO TH THE LOWER AUTHORITIES ACTION ASSESSING THE SAME AS BUSINESS INCOME. THE A SSESSEE ADMITTEDLY IS IN REAL ESTATE DEVELOPMENT BUSINESS. IT ENTERED INTO THE A BOVE IDENTICAL VERDICT THREE DEVELOPMENT AGREEMENTS WITH AS MANY VENDOR PARTIES FOLLOWED BY THE LATTER PAYING IT VARIABLE AMOUNTS IN QUESTION TOTALING TO RS.3.87 CRORES IN LIEU OF GETTING FORMERS RIGHT TO PREEMPTIVE PURCHASE OR RIGHT TO S UE FOR SPECIFIC PERFORMANCE SURRENDERED IN THEIR FAVOUR. THERE IS NO EVIDENCE IN THE CASE FILE INDICATING THE ASSESSEE TO HAVE UNDERTAKEN EVEN A SINGLE ACTIVITY OF DEVELOPMENT IS ALL THREE PARCELS OF LAND. WE NOTICE IN THIS FACTUAL BACKDRO P THAT HONBLE JURISDICTIONAL HIGH COURTS DECISION IN BARODA CEMENT AND CHEMICAL CASE (SUPRA) HOLDS THAT THE AMOUNT RECEIVED IN LIEU OF SUCH A RIGHT TO SUE AVAI LABLE AFTER A VENDOR BREACHING THE RELEVANT AGREEMENT IS NOT AN ACTIONABLE CLAIM S O AS TO BE TRANSFERRED U/S.6(E) OF THE TRANSFER AND PROPERTY ACT GIVING RISE TO AS SESSABLE CAPITAL GAINS. THEIR LORDSHIPS OF CALCUTTA HIGH COURT (SUPRA) FURTHER RE ITERATE THE SAME VIEW MR. MADHUSUDANS CASE IS THAT THE AMOUNT IN QUESTION HA S BEEN RIGHTLY ASSESSED AS ASSESSEES BUSINESS INCOME. WE FIND NO MERIT IN TH E INSTANT PLEA AS THE ASSESSEE HAS NEITHER PAID ANY CONSIDERATION MONEY NOR CARRIE D OUT ANY DEVELOPMENT ACTIVITY. IT HAD MERELY OBTAINED A LICENSEE RIGHT TO ENTER INTO POSSESSION INTO THREE PARCELS OF LAND NOT CREATING ANY EASEMENT OR INTEREST THEREIN AS PER SECTION 52 OF THE EASEMENT LAW. WE FURTHER OBSERVE THAT TH E ASSESSEE DEVELOPER COULD NOT HAVE ENTERED INTO FULL FLEDGED POSSESSION IN PE RFORMANCE OF THE AGREEMENT IN VIEW OF STATUTORY BAR U/S. 63 OF THE BOMBAY TENANCY AND AGRICULTURAL LAND ACT, 1948 (APPLICABLE IN GUJARAT STATE). THERE IS NO MAT ERIAL INDICATING THE ABOVE LANDS ITA NO. 3316 & C.O. 206/AHD/2015 . A.Y. 2008-09 4 BEING CONVERTED TO NON AGRICULTURAL. THE SAME SUFF ICIENTLY INDICATES THAT ASSESSEES LICENSE RIGHT EXISTED ON PAPER ONLY. H ONBLE BOMBAY HIGH COURTS DECISION IN MANOJ B. JOSHIS CASE (SUPRA) HOLDS THA T SUCH AN AMOUNT IS NOT TO BE TAXED AS INCOME U/S.2(24) OF THE ACT. THIS TRIBUNA LS CO-ORDINATE BENCH DECISION IN GOVINDBHAI C. PATELS CASE (SUPRA) ALSO IS OF TH E VIEW THAT AN IDENTICAL COMPENSATION SUM AS IN FACTS OF THE INSTANT CASE IS NOT A BUSINESS INCOME AS WELL SINCE NOT COVERED UNDER SPECIFIC INSTANCES U/S.28(V A) OF THE ACT. THE REVENUES STANDS THEREFORE HOLDING BOTH DEVELOPMENT AND CANCE LLATION AGREEMENTS IN ALL CASES IS NOT SUSTAINABLE IN VIEW OF THE SAME UNREGI STERED DOCUMENTS DOES NOT CARRY ANY MERIT AS SECTION 17 OF THE REGISTRATION L AW COULD NOT HAVE BEEN APPLIED IN VIEW OF BAR ON TRANSFER OF THE LANDS IN QUESTION . WE THUS OBSERVE THAT ASSESSEES ABOVE DEVELOPMENT LICENSE ACQUIRED IN IT S ALL THREE AGREEMENTS DOES NOT AMOUNT TO PART PERFORMANCE REQUIRING COMPULSORY REGISTRATION U/S.17 OF THE REGISTRATION ACT. WE THEREFORE CONCLUDE IN THIS VI EW OF ALL THIS EVIDENCE AS WELL AS LEGAL POSITION THAT THE IMPUGNED COMPENSATION AM OUNT IS NOT LIABLE TO BE TREATED AS INCOME U/S.2(24) OF THE ACT NOR THE SAME IS TAXABLE AS CAPITAL GAIN FOR BUSINESS INCOME BEING IN THE NATURE OF A CAPITAL RE CEIPT. 7. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDIN ATE BENCH (SUPRA), WE DECLINE TO INTERFERE. APPEAL FILED BY THE REVENUE I S ACCORDINGLY DISMISSED. 8. THE CROSS OBJECTION OF THE ASSESSEE IS IN SUPPORT O F THE ORDER OF THE LD. CIT(A) AND THEREFORE NEEDS NO SEPARATE ADJUDICATION. ORDER PRONOUNCED IN OPEN COURT ON 04- 04- 20 18 SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 04 /04/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. ITA NO. 3316 & C.O. 206/AHD/2015 . A.Y. 2008-09 5 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD