Sri. K.N. Surendra Reddy & Smt. Vinutha S. Reddy, Bangalore V. ACIT, Bangalore

ITA 334/BANG/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9442 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-06-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 10-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S VENKATESAN
• Keywords: Business income

Judgement Text

ITA.334/BANG/2014 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.334/BANG/2014 (ASSESSMENT YEAR : 2005-06) SHRI. K. N. SURENDRA REDDY & SMT. VINUTHA S. REDDY, NO.109, 17 TH C MAIN, V BLOCK, KORAMANGALA, BANGALORE 560 095 .. APPELLANT PAN : AADHS6630R V. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE -7(1), BENGALURU .. RESPONDENT ASSESSEE BY : SHRI. S. VENKATESAN, CA REVENUE BY : SHRI. BIPIN C. N, JCIT HEARD ON : 13.07.2016 PRONOUNCED ON : 26 .08.2016 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY ASSESSEE IT IS AGGRIEVED O N AN ADDITION OF RS.1 CRORE UNDER THE HEAD SHORT-TERM CAPITAL GAINS. ITA.334/BANG/2014 PAGE - 2 02. FACTS APROPOS ARE THAT ASSESSEE, A HUF HAD FILE D RETURN OF INCOME DECLARING INCOME OF RS.1,81,67,475/-. DURING THE A SSESSMENT PROCEEDINGS IT WAS NOTED BY THE AO THAT ASSESSEE HAD RECEIVED A SUM OF RS.1 CRORE FROM M/S. SHOBHA INNTERCITY TECHNOPOLIS P. LTD, TOWARDS DEVELOPMENT AND OTHER WORKS, BASED ON A DEVELOPMENT AGREEMENT DT.31.12.20 04. THE ASSESSEE HAD ON THE VERY SAME DAY SOLD LAND AT S. NO.95/2, BELLA NDUR VILLAGE, VARTHUR HOBLI TO THE VERY SAME PARTY WHEREIN CONSIDERATION SHOWN WAS RS.1,28,00,000/-. ASSESSSEE HAD SHOWN SHORT TERM C APITAL GAINS FROM SUCH SALE IN ITS RETURN. HOWEVER VIS-A-VIS THE DEVELOPM ENT AGREEMENT ENTERED ON THE VERY SAME DAY ASSESSEE DECLARED RS.8 LAKHS AS B USINESS INCOME TAKING 8% OF THE RECEIPT OF RS.1 CRORE FROM M/S. SHOBHA IN NTERCITY TECHNOPOLIS P. LTD. ASSESSEE HAD ESTIMATED THE PROFIT SINCE IT HA D NOT MAINTAINED BOOKS OF ACCOUNT. AO WAS OF THE OPINION THAT THE DEVELOPMEN T AGREEMENT WAS A FARCE AND IT REFLECTED THE EXTRA AMOUNT PAID BY M/S . SHOBHA INNTERCITY TECHNOPOLIS P. LTD, TO THE ASSESSEE AS A PART OF CO NSIDERATION FOR SALE OF THE LAND. AS PER THE AO, AGREEMENTS WERE DATED EVEN AN D THE PAYMENTS MENTIONED IN THE DEVELOPMENT AGREEMENT WERE RECEIVE D BY THE ASSESSEE MUCH BEFORE THE DATE OF AGREEMENT ITSELF. HE THERE FORE REFUSED TO ACCEPT THE WORKING OF THE ASSESSEE. SHORT-TERM CAPITAL GA INS WAS COMPUTED CONSIDERING THE SALE CONSIDERATION OF RS.2,28,00,00 0/- INSTEAD OF ITA.334/BANG/2014 PAGE - 3 RS.1,28,00,000/- CLAIMED BY THE ASSESSEE. ADDITION RESULTED IN PRORATA INCREASE IN CAPITAL GAINS. 03. AGGRIEVED ASSESSEE MOVED IN APPEAL BEFORE THE C IT (A). ARGUMENT OF THE ASSESSEE BEFORE THE CIT (A) WAS THAT SUM OF RS.1 CRORE RECEIVED FROM M/S. SHOBHA INNTERCITY TECHNOPOLIS P. LTD, WAS FOR DEVELOPMENT WORKS LIKE LEVELLING OF LAND, FENCING, CONSTRUCTION OF COMPOUND WALL ETC., AS PER THE ASSESSEE SUM RECEIVED WAS IN ADDITION TO THE SALE CONSIDERATION. IT COULD NOT BE CONSIDERED AS A PART OF THE CAPITAL GAINS. HOWEVER THE CIT (A) WAS NOT APPRECIATIVE OF THE ABOVE CONTENTIONS. ACCORDING TO HIM ASSESSEES CLAIM THAT IT WAS CARRYING ON ANY BUSINE SS OF DEVELOPMENT WAS NOT SUBSTANTIATED. AS PER THE CIT (A) DEVELOPMENT AGREEMENT MERELY STATED THAT ASSESSEE WAS TO CARRY OUT VARIOUS DEVEL OPMENT WORKS IN THE SCHEDULED PROPERTY LIKE LAYING OF ELECTRICITY LINES , CABLES, PIPES, LEVELLING OF LAND, FENCING OF PROPERTY, CONSTRUCTION COMPOUND WA LL, PLANTING OF TREES ETC., AS PER THE LD. CIT (A) SCOPE OF WORK WAS DIV ERSE AND THERE WAS NOTHING ON RECORD TO SHOW ANY WORK WAS EXECUTED. F URTHER AS PER THE ASSESSEE, IF THE AMOUNT WAS CONSIDERED AS BUSINESS RECEIPT ASSESSEE WAS LIABLE TO DO A TAX AUDIT WHICH IT HAD NOT DONE. HE THUS CONFIRMED THE ORDER OF AO. ITA.334/BANG/2014 PAGE - 4 04. NOW BEFORE US, LD. AR SUBMITTED THAT WITHOUT DO UBT THERE WERE TWO AGREEMENTS. DEVELOPMENT AGREEMENT CLEARLY SPECIFI ED THE ROLE OF ASSESSEE AS DOING DEVELOPMENT WORKS IN THE LAND. ACCORDING TO LD. AR IT WAS CLEARLY IN THE NATURE OF A WORKS CONTRACT. LD. AR SUBMITTED THAT NO VERIFICATION WAS DONE BEFORE THE LOWER AUTHORITIES CAME TO A CONCLUSION THAT ASSESSEE HAD NOT DONE ANY OF THE WORK MENTIONED IN THE DEVELOPMENT AGREEMENT. IN ANY CASE ACCORDING TO HIM, TWO DIFFE RENT AGREEMENTS OUGHT NOT HAVE BEEN COMBINED BY THE LOWER AUTHORITIES AND NON-EXISTENT CAPITAL GAINS FASTENED ON THE ASSESSEE. 05. PER CONTRA, LD. DR SUPPORTED THE ORDERS OF LOWE R AUTHORITIES. ACCORDING TO HIM, THE TWO AGREEMENTS WERE ON THE VE RY SAME DATE. ASSESSEE WAS CAMOUFLAGING THE CONSIDERATION RECEIV ED ON SALE OF LAND AS DEVELOPMENT INCOME. 06. I HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. CONTENTION OF THE ASSESSEE IS THAT THE SUM OF RS.1 CRORE RECEIVED IN PURSUANCE TO DEVELOPMENT AGREEMENT WAS NOT A PART O F CONSIDERATION FOR SALE OF LAND. IT IS TRUE THAT THERE WERE TWO SEPAR ATE AGREEMENTS, ONE FOR SALE OF LAND AND THE OTHER CALLED DEVELOPMENT AGREEMENT, ENTERED BY THE ASSESSEE ON THE VERY SAME DAY WITH SICT. IT IS NOT DISPUTED THAT THE TYPE OF ITA.334/BANG/2014 PAGE - 5 WORK REQUIRED TO BE DONE BY THE ASSESSEE AS MENTION ED IN THE DEVELOPMENT AGREEMENT WAS IN THE NATURE OF LAYING OF ELECTRIC L INES, CABLE, WATER LINE, PIPES, LEVELLING OF LAND, FENCING OF PROPERTY, CONS TRUCTION OF COMPOUND WALL ETC., LOWER AUTHORITIES HAD NOT EXAMINED ANY PERSO N FROM SICT BEFORE CONCLUDING THAT THE CONSIDERATION MENTIONED IN THE DEVELOPMENT AGREEMENT WAS ONLY A PART OF THE CONSIDERATION FOR SALE OF TH E LAND. IF THE ASSESSEE HAD DONE THE WORK AS MENTIONED IN THE DEVELOPMENT AGREE MENT IT COULD VERY WELL CLAIM SUCH RECEIPTS TO BE BUSINESS RECEIPT. H OWEVER, FOR ASCERTAINING THIS, IT WAS NECESSARY TO VERIFY THE RECORDS OF SIC T AND ALSO EXAMINE THE CONCERNED PERSON FROM THE SAID COMPANY. WHAT WAS T O BE SEEN WAS WHETHER ASSESSEE HAD ACTUALLY EXECUTED SUCH WORK. JUST BECAUSE CONSIDERATION MENTIONED IN THE DEVELOPMENT AGREEMEN T WAS RECEIVED BY THE ASSESSEE PRIOR TO THE DATE OF AGREEMENT WOULD NOT C HANGE THE COMPLEXION OF THE TRANSACTION, IF IT WAS IN THE NATURE OF A BUSIN ESS TRANSACTION. IN THE FITNESS OF THINGS, I AM OF THE OPINION THAT THE MAT TER REQUIRES A FRESH LOOK BY THE AO. I SET ASIDE THE ORDER OF THE AO AND REMIT THE ISSUE REGARDING SHORT- TERM CAPITAL GAINS FOR CONSIDERATION AFRESH IN ACCO RDANCE WITH LAW. ITA.334/BANG/2014 PAGE - 6 07. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DAY OF AUGUST, 2016. SD/- (ABRAHAM P GEORGE) ACCOUNTANT MEMBER MCN COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR