SHRI PRAKASH GULABRAI CHAWLA, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX 27(2), MUMBAI

ITA 5869/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4052 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 14-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILLIP
• Assessee Lawyers: REEPAL TRALSHAWALA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Opportunity of being heard; Cost of acquisition; Capital receipt; Capital Gains
• Section: 143(3); 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL , ACCOUNTANT MEMBER ITA NO. 5869 / MUM . /201 7 ( ASSESSMENT YEAR : 20 12 13 ) SHRI PRAKASH GULABRAI CHAWLA BUILDING NO.123, D WING, FLAT NO.401 MAYUR CO OPERATIVE SOCIETY TILAK NAGAR, CHAMBUR 400 089 PAN AACPC8581C . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 27(2), MUMBAI . RESPONDENT REVENUE BY : SHRI NEIL PHILLIP ASSESSEE BY : SHRI REEPAL TRALSHAWALA DATE OF HEARING 16.05.2019 DATE OF ORDER 19.08.2019 O R D E R PER SAKTIJIT DEY. J.M. CAPTIONED APPEAL BY THE ASSESSEE ARIS ES OUT OF ORDER DATED 9 TH JUNE 2017, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 25, MUMBAI, FOR THE ASSESSMENT YEAR 2012 13. 2 . GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND FACTS IN CONFIRMING THE ORDER PASSED BY THE ASSESSING OFFICER U/S. 143(3) OF THE ACT DATED 18.03.2015. 2 SHRI PRAKASH GULABRAI CHAWLA 2. THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN TREATING THE INCOME EARNED FROM SALE OF DEVELOPMENT RIGHTS I N RESPECT OF PARTLY CONSTRUCTED PROJECT AS INCOME UNDER THE HEAD 'CAPITAL GAINS' AS AGAINST THE BUSINESS INCOME OFFERED BY THE APPELLANT. 3. THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DETERMINING INCOME UNDER THE HEAD 'CAPITAL GAINS' AMOUNTING TO RS. 1,65,61,535/ - 4. THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND FACTS IN HOLDING THAT THE PROVISIONS OF S. 50C OF THE ACT ARE APPLICABLE IN RESPECT OF TRANSFE R OF DEVELOPMENT RIGHTS. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DETERMINING THE SALE VALUE AS PER STAMP DUTY VALUATION WITHOUT REFERRING THE MATTER TO THE VALUATION OFFICER. 6. THE LEARNED CI T(A) HAS ERRED IN LAW AND FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN FAILING TO GRANT INDEXATION BENEFIT IN RESPECT OF COST OF IMPROVEMENT INCURRED IN RESPECT OF THE PARTLY CONSTRUCTED PROJECT IN A.Y. 2011 12 AMOUNTING TO ` 33,31,171. 3 . AS COULD BE SEEN FROM THE GROUNDS RAISED, THE FIRST ISSUE WHICH ARISES FOR CONSIDERATION IS, WHETHER THE INCOME EARNED FROM SALE OF DEVELOPMENT RIGHTS IN RESPECT OF A PARTIALLY CONSTRUCTED PROJECT SHOULD BE ASSESSED UNDER THE HEAD CAPITAL GAIN OR AS BUS INESS INCOME . THE OTHER ASPECT S OF THE ISSUE ARE , IN CASE THE AFORESAID INCOME IS TREATED AS CAPITAL GAIN, WHETHER PROVISIONS OF SECTION 50C OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) ARE APPLICABLE AND WHAT SHOULD BE THE INDEXATION BENEFIT ON ACCO UNT OF COST OF IMPROVEMENT. 3 SHRI PRAKASH GULABRAI CHAWLA 4 . BRIEF FACTS ARE, THE ASSESSEE IS AN INDIVIDUAL AND CARRIES ON BUSINESS IN UNDERTAKING CONTRACT WORK RELATING TO DEVELOPMENT OF REAL ESTATE PROJECT THROUGH HIS PROPRIETORSHIP CONCERN M/S. MOHINI ENGINEERING AND CONTRACTORS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED HIS RETURN OF INCOME ON 23 RD SEPTEMBER 2012, DECLARING TOTAL INCOME OF ` 40,34,360. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON VERIFYING THE MATERIAL ON RECORD FOUND THAT THE ASSE SSEE HAD PURCHASED DEVELOPMENT RIGHTS OF A PROJECT FROM N.N. CONSTRUCTION, VIDE DEVELOPMENT AGREEMENT DATED 4 TH MAY 2007, FOR A SUM OF ` 25 LAKH. THE SAID DEVELOPMENT RIGHTS WERE SOLD BY THE ASSESSEE DURING THE YEAR TO M/S. CRYSTAL BUIL D TECH, THROUGH MEMOR ANDUM OF UNDER STANDING (MOU) DATED 29 TH NOVEMBER 2011. ON SALE OF SUCH DEVELOPMENT RIGHTS, THE ASSESSEE RECEIVED AN AMOUNT OF ` 2,28,45,628. HOWEVER, THE ASSESSEE HAS TREATED THE AFORESAID RECEIPT AS INCOME FROM BUSINESS AND CREDITED TO THE PROFIT & LOSS ACCOUNT. FURTHER, AGAINST SUCH INCOME, THE ASSESSEE HAS ALSO DEBITED CERTAIN EXPENDITURE TO THE PROFIT & LOSS ACCOUNT. ON VERIFYING THE AGREEMENT, THE ASSESSING OFFICER FOUND THAT THE STAMP DUTY VALUE OF THE PROPERTY AS PER THE AGREEMENT IS FIXED AT ` 3,22,08,000 .I N VIEW OF THE AFORESAID FACTS, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE RECEIPT FROM SALE OF DEVELOPMENT RIGHTS SHOULD NOT BE ASSESSED AS CAPITAL GAIN IN ACCORDANCE WITH THE PROVISIONS OF SECTION 4 SHRI PRAKASH GULABRAI CHAWLA 50C OF THE ACT . IN RESPONSE, IT WAS SUBMITTED BY THE ASSESSEE THAT HE IS IN THE BUSINESS OF CONSTRUCTION AND THE DEVELOPMENT RIGHTS WERE PURCHASED FOR THE PURPOSE OF CONSTRUCTION OF A MULTISTORIED BUILDING . IN THIS REGARD, THE ASSESSEE HAS ALSO MADE LAYOUT PLANS, DESIGN S AND OBTAINED SANCTION FROM THE GOVERNMENT AUTHORITIES. FURTHER, THE ASSESSEE ALSO LEVELED THE LAND , LAID FOUNDATION AND CONSTRUCTED UP TO PLINTH LEVEL AND ALSO BOUNDARY WALLS. THUS, IT WAS SUBMITTED , THE INTENTION OF THE ASSESSEE WAS TO CONSTRUCT THE PRO JECT . T HEREFORE, THE SALE OF DEVELOPMENT RIGHT WOULD PARTAKE THE CHARACTER OF BUSINESS INCOME. THE ASSESSING OFFICER, HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE. HE OBSERVED , IT IS FOR THE ASSESSEE TO ESTABLISH THAT INCOME RECEIVED BY H IM WAS ON ACCOUNT OF ADVENTURE IN THE NATURE OF TRADE. HE OBSERVED, AT THE TIME OF PURCHASE OF DEVELOPMENT RIGHTS OF THE SUBJECT PROPERTY ON 7 TH MAY 2007, THE ASSESSEE HA D SHOWN IT AS INVESTMENT IN THE BALANCE SHEET AND IT WAS NOT ROUTED THROUGH PROFIT & L OSS ACCOUNT AS STOCK IN TRADE. THUS, HE OBSERVED , THE ENTRY IN THE BOOKS OF ACCOUNT MAKES ASSESSEES INTENTION CLEAR THAT THE DEVELOPMENT RIGHT WAS PURCHASED TOWARDS INVESTMENT AND NOT FOR BUSINESS PURPOSE. THUS, HE OBSERVED , INCOME RECEIVED FROM THE SALE OF DEVELOPMENT RIGHTS IS A CAPITAL RECEIPT AND HAS TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN . ACCORDINGLY, BY APPLYING THE PROVISIONS OF SECTION 50C OF THE ACT, HE TREATED THE STAMP 5 SHRI PRAKASH GULABRAI CHAWLA DUTY VALUE OF ` 3,22,08,000, AS DEEMED SALE CONSIDERATION AND AFTER ALL OWING COST OF ACQUISITION AND COST OF IMPROVEMENT, HE DETERMINED THE NET LONG TERM CAPITAL GAIN AT ` 1,65,61,535. THE ASSESSEE CHALLENGED THE AFORESAID ADDITION BEFORE THE FIRST APPELLATE AUTHORITY. 5 . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIALS ON RECORD, LEARNED COMMISSIONER (APPEALS) OBSERVED , WHILE THE ASSESSEE HA S RO UTED THE RECEIPTS AND EXPENDITURE FROM THE COMPLETED PROJECTS , SUCH AS , ANNAPURNA CO OPERATIVE HOUSING SOCIETY LTD., AND ANDHERI WADER CHS LTD., THROUGH PROFIT & LOSS ACCOUNT AND OFFERED THE INCOME FROM SUCH PROJECT IN THE ASSESSMENT YEAR 2011 12 , THE RECEIPT AND EXPENDITURE IN CASE OF TH IS PARTICULAR PROJECT WAS DIRECT LY TAK EN TO THE BALANCE SHEET INSTEAD OF RO U TING IT THROUGH THE PROFIT & LOSS ACCOUNT. L EARNED COMMISSIONER (APPEALS) OBSERVED , WHAT THE ASSESSEE ACQUIRED IN THE YEAR 2007 AND TRANSFERRED IN THE YEAR 2011 IS THE DEVELOPMENT RIGHTS OF THE PARTICULAR PROJECT. ANY EXPENDITURE IN RESPECT OF SUCH DEVELOPMENT RIGHTS WILL ONLY BE IN THE NATURE OF COST OF IMPROVEMENT. IN THIS CONTEXT, HE REFERRED TO PARA (VIII) OF THE DEVELOPMENT AGREEMENT DATED 4 TH MAY 2007, WHEREIN THE OWNER OF THE LAND WHILE GRANTING DEVELOPMENT RIGHT HA D ALLOWED THE ASSESSEE TO EXECUTE CONVEYANCE DEED IN FAVOUR OF THE CO OPERATIVE HOUSING SOCIETY TO BE FORMED BY THE PURCHASER S OF THE PREMISES OF THE BUILDING TO BE CONSTRUCTED. HE OBSERVED , HAD THE 6 SHRI PRAKASH GULABRAI CHAWLA ASSESSEE EXECUTED THE CONVEYANCE DEED IN FAVOUR OF THE CO OPERATIVE SOCIETY AFTER GETTING THE BUILDING CONSTRUCTED BY HIMSELF , THE PROCEEDS COULD HAVE BEEN ASSESSED AS BUSINESS INCOME , WHICH IS NOT THE CASE. HE OBSERVED , ASSESSEE HA D SIMPLY ACQUIRED AND SOLD DEVELOPMENT RIGHT AND IN THE PROCESS HAS MADE SUBST ANTIAL GAIN. HE OBSERVED , WHATEVER EXPENDITURE INCURRED BY THE ASSESSEE BETWEEN THE DATE OF ACQUISITION AND DATE OF TRANSFER WOULD ONLY IMPROVE THE VALUE OF THE CAPITAL ASSET. THUS, HE CONCURRED WITH THE ASSESSING OFFICER THAT THE INCOME FROM SALE OF DEVEL OPMENT RIGHT HAS TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN . IN THIS CONTEXT, HE RELIED UPON CERTAIN JUDICIAL PRECEDENTS ALSO. AS REGARDS OBJECTION OF THE ASSESSEE AGAINST APPLICABILITY OF SECTION 50C OF THE ACT, LEARNED COMMISSIONER (APPEALS) OBSERVED , THE PROVISIONS OF SECTION 50C OF THE ACT WOULD BE APPLICABLE AS THE ASSET SOLD BY THE ASSESSEE IS NOT BUSINESS ASSET. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS NOT REFERRED THE VALUATION OF THE PROPERTY TO THE DVO AS PER SECT ION 50C (2) OF THE ACT,LEARNED COMMISSIONER (APPEALS) OBSERVED , THE ASSE SSING OFFICER DOES NOT HAVE SUO MOTU POWER TO REFER VALUATION OF THE PROPERTY TO THE DVO. AS REGARDS ASSESSEES CLAIM OF ADDITION OF EXPENDITURE OF ` 33 LAKH IN THE ASSESSMENT YEAR 2011 12 TO THE COST OF IMPROVEMENT FOR INDEXATION PURPOSE, LEARNED COMMISSIONER (APPEALS) AGREED WITH THE ASSESSING OFFICER THAT SUCH AMOUNT C ANNOT BE TREATED AS COST OF 7 SHRI PRAKASH GULABRAI CHAWLA CONSTRUCTION AS THEY ARE MERE ADVANCES TO CERTAIN PARTIES. THUS, ULTIMATELY, HE SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER. 6 . REITERATING THE SUBMISSIONS MADE BEFORE THE DEPARTMENTAL AUTHORITIES THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE DEVELOPMENT RIGHTS OF THE PROJECT HAS BEEN SHOWN UNDER THE HEAD CURRENT ASSETS IN THE B ALANCE S HEET. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE COPY OF THE B ALANCE S HEET AS ON 31 ST MARCH 2012 IS PLACED AT PAGE 18 OF THE PAPER BOOK. HE SUBMITTED , SIMILAR ACCOUNTING TREATMENT WAS GIVEN IN THE ASSESSMENT YEAR S 2010 11 AND 2011 12. THE LEARN ED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASSESSEE FOLLOWED THE AFORESAID ACCOUNTING METHOD CONSISTENTLY. DRAWING OUR ATTENTION TO THE COPY OF MOU DATED 8 TH APRIL 2011 PLACED AT PAGE 26 OF THE PAPER BOOK, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , AS PER THE TERMS OF THE AGREEMENT, THE ASSESSEE WAS REQUIRED TO COMPLETE CONSTRUCTION UP TO PLINTH LEVEL. FURTHER, HE SUBMITTED , BY AGREEMENT DATED 29 TH NOVEMBER 2011, THE ASSESSEE ASSIGNED THE DEVELOPMENT RIGHTS OF THE PROPERTY TO M/S. CRYSTAL BUIL D TECH. HE ALSO TOOK US THROUGH AGREEMENT EXECUTED IN MAY 2007 UNDER WHICH THE ASSESSEE ACQUIRED THE DEVELOPMENT RIGHTS OF THE PROPERTY. TO IMPRESS UPON THE FACT THAT THE ASSESSEE IS A DEVELOPER AND IS DEVELOPING MANY OTHER PROJECTS THE LEARNED AUTHORISED REPRESEN TATIVE DREW OUR ATTENTION TO VARIOUS OTHER MATERIALS ON RECORD. THE LEARNED AUTHORISED 8 SHRI PRAKASH GULABRAI CHAWLA REPRESENTATIVE SUBMITTED , WHILE ACQUIRING THE DEVELOPMENT RIGHTS IN THE YEAR 2007, THE INTENTION OF THE ASSESSEE WAS TO DEVELOP THE PROJECT AND NOT TO KEEP IT AS INVESTM ENT. THEREFORE, MERELY BECAUSE AT THE TIME OF PURCHASE IT WAS NOT SHOWN AS STOCK IN TRADE IN THE B ALANCE S HEET , IT CANNOT BE INFERRED THAT THE ASSESSEE ACQUIRED IT AS INVESTMENT . T O SUPPORT SUCH CONTENTION, THE LEARNED AUTHORISED REPRESENTATIVE RELIED UPON THE DECISION OF THE TRIBUNAL IN DCIT V/S RAJESH BUILDERS, ITA NO.3980/MUM./2009, DATED 13 TH OCTOBER 2010. THUS, HE SUBMITTED , THE INCOME RECEIVED FROM SALE OF THE DEVELOPMENT RIGHT SHOULD BE TREATED AS INCOME FROM BUSINESS. AS REGARDS APPLICABILITY OF SEC TION 50C OF THE ACT, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , IRRESPECTIVE OF THE FACT WHETHER ASSESSEE REQUEST S FOR REFERRING THE VALUATION OF THE PROPERTY TO THE DVO , THE ASSESSING OFFICER IS DUTY BOUND TO REFER THE VALUATION OF THE PROPERTY TO T HE DVO IN TERMS OF SECTION 50C(2) OF THE ACT , IN CASE , HE WANTS TO ADOPT THE STAMP DUTY VALUE OF THE PROPERTY AS DEEMED SALE CONSIDERATION. IN THIS CONTEXT, HE RELIED UPON THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN SUNIL KUMAR AGARWAL V/S CIT, [201 5] 372 ITR 83 (CAL.) .O N THE ISSUE OF INDEXATION BENEFIT ON COST OF IMPROVEMENT INCURRED IN THE ASSESSMENT YEAR 2011 12, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , NEITHER THE ASSESSING OFFICER NOR LEARNED COMMISSIONER (APPEALS) HAVE PROPERLY APPRECIA TED THE FACTS 9 SHRI PRAKASH GULABRAI CHAWLA BROUGHT ON RECORD. THUS, HE SUBMITTED , INDEXATION BENEFIT SHOULD BE ALLOWED TO THE ASSESSEE. 7 . THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELYING UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND LEARNED COMMISSIONER (APPEALS) SUBMITTED , IT WAS NEVER THE INTENTION OF THE ASSESSEE TO DEVELOP THE PROJECT. HE SUBMITTED , THE MOU MAKE S IT CLEAR THAT THE ASSESSEE WOULD DEVELOP UP TO THE PLINTH LEVEL ONLY . HE SUBMITTED , THE ASSESSEE HAS SIMPLY PURCHASED DEVELOPMENT RIGHTS AND SOLD IT. HE SUBMIT TED , THE INTENTION OF THE ASSESSEE TO ACQUIRE THE DEVELOPMENT RIGHTS AS INVESTMENT IS ALSO REVEALED FROM ACCOUNTING TREATMENT GIVEN BY THE ASSESSEE AT THE TIME OF PURCHASE AS THE SAME WAS NOT ROUTED THROUGH THE PROFIT & LOSS ACCOUNT. THUS, HE SUBMITTED , TH E INCOME FROM SALE OF DEVELOPMENT RIGHT WAS RIGHTLY ASSESSED AS INCOME UNDER THE HEAD CAPITAL GAIN . AS REGARDS APPLICABILITY OF SECTION 50C OF THE ACT, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , SINCE THE ASSESSEE DID NOT OBJECT TO THE VALUE DETERM INED BY THE STAMP VALUATION AUTHORITY AND SOUGHT A REFERENCE TO THE DVO FOR DETERMINING THE VALUE OF THE PROPERTY, THE ASSESSING OFFICER WAS NOT UNDER ANY OBLIGATION TO REFER THE VALUATION OF THE PROPERTY TO THE DVO. AS REGARDS CLAIM OF INDEXATION BENEFIT FOR COST OF IMPROVEMENT, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , ASSESSEES CLAIM MAY BE VERIFIED AND DECIDED IN ACCORDANCE WITH LAW. 10 SHRI PRAKASH GULABRAI CHAWLA 8 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO APPLIED OUR MIND TO THE DECISIONS RELIED UPON. THE FIRST ISSUE WHICH NEEDS TO BE DECIDED IS, WHETHER THE INCOME FROM SALE OF DEVELOPMENT RIGHT IS TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN OR BUSINESS AND PROFESSION . UNDISPUTEDLY, VIDE DEVELOPMENT AGRE EMENT EXECUTED IN MAY 2007, THE ASSESSEE HA D ACQUIRED DEVELOPMENT RIGHTS FROM N.N. CONSTRUCTIONS, WHO WAS THE OWNER OF LAND ADMEASURING 1555.1 SQ.MTRS. AT MALAVANI, MALAD (WEST), MUMBAI. AS PER THE TERMS OF THE DEVELOPMENT AGREEMENT, THE ASSESSEE ACQUIRED THE DEVELOPMENT RIGHTS OF DEVELOPING THE BUILDING AND FURTHER , RIGHT, TITLE AND INTEREST TO SELL THE NEWLY CONSTRUCTED UNITS TO THE INTENDING PURCHASER S . THUS, FROM THE TERMS OF THE AGREEMENT, IT IS CLEAR THAT THE OWNER OF THE LAND HAD NOT SOLD THE LAND TO THE ASSESSEE BUT HAS TRANSFERRED THE DEVELOPMENT RIGHTS TO DEVELOP THE PROPERTY AND SELL THE INDIVIDUAL UNITS. FROM THE MOU DATED 8 TH MAY 2011 BETWEEN THE ASSESSEE AND CRYSTAL BUILDTECH, IT APPEARS, THE ASSESSEE HAS TRANSFERRED ALL THE RIGHTS AND INTEREST TO THE SUB DEVELOPER TOWARDS DEVELOPMENT OF THE BUILDING. ONLY CONDITION IMPOSED IN THE MOU IS , THE ASSESSEE HAS TO COMPLETE THE FOLLOWING WORKS: A ) TO COMPLETE THE ON GOING WORK OF FOUNDATION, PILING AND LAYING WORK UP TO THE PLINTH LEVEL; B ) SHIFTING AND DUMPING OF ALL THE DEBRIS PRESENT AT THE SITE ; AND 11 SHRI PRAKASH GULABRAI CHAWLA C ) LEVELING THE ENTIRE LAND AND FENCING THE BOUNDARIES WITH BRICK WALL AND GATE. 9 . SUBSEQUENTLY, THE ASSESSEE HAS ENTERED INTO ANOTHER AGREEMENT WITH CRYSTAL BUILDTECH, ON 29 TH NOVEMBER 2011, TRANSFERRING ALL ITS RIGHTS RELATING TO THE DEVELOPMENT OF THE PROJECT. THUS, FROM THE READING OF ALL THE AGREEMENTS , PRIMA FACIE IT APPEARS , WHAT THE ASSESSEE ACQUIRED FROM THE OWNER OF THE LAND IS THE DEVELOPMENT RIGHTS FOR BUILDING THE H OUSING PROJECT AND NOT THE OWNERSHIP RIGHT ON THE LAND. IN TURN, THE ASSESSEE HAS TRANSFERRED THE RIGHT ACQUIRED BY HIM TO CRYSTAL BUILDTECH THROUGH MOU AND THE SUBSEQUENT DEVELOPMENT AGREEMENT. THUS, IT IS CLEAR , THOUGH THE ASSESSEE HA D ACQUIRED THE DEVEL OPMENT RIGHTS OF THE BUILDING FOR CONSTRUCTION OF THE PROJECT , FOR WHATEVER MAY BE THE REASON , SUBSEQUENTLY THE ASSESSEE TRANSFERRED THE DEVELOPMENT RIGHT TO THE SUB DEVELOPER AFTER CARRYING OUT CONSTRUCTION WORK TILL PLINTH LEVEL. THEREFORE, MERELY BECAUS E AT THE TIME OF PURCHASE OF DEVELOPMENT RIGHTS, THE ASSESSEE HA D NOT ROUTED IT THROUGH THE PROFIT & LOSS ACCOUNT , IT CANNOT BE THE SOLE DETERMINING FACTOR IN DECIDING WHETHER IT SHOULD BE TREATED AS INVESTMENT OR STOCK IN TRADE. IT IS WELL SETTLED THAT AC COUNTING TREATMENT GIVEN IN THE BOOKS OF ACCOUNT IS NOT SACROSANCT . THEREFORE, ASSESSEES CLAIM OF BUSINESS INCOME HAS TO BE CONSIDERED AFTER TAKING INTO ACCOUNT OF OTHER RELEVANT FACTS AND MATERIALS INCLUDING THE NATURE OF BUSINESS 12 SHRI PRAKASH GULABRAI CHAWLA CARRIED ON BY THE ASSES SEE. UNDISPUTEDLY, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPING REAL ESTATE. IT IS ALSO THE CLAIM OF THE ASSESSEE THAT IT IS DEVELOPING OR HAS DEVELOPED VARIOUS OTHER HOUSING PROJECTS AND THE DEVELOP MENT RIGHTS OF THE SUBJECT PROPERTY WAS ALSO ACQ UIRED FOR DEVELOPMENT PURPOSE. IN FACT, LEARNED COMMISSIONER (APPEALS) HIMSELF HAS STATED THAT IN RESPECT OF SOME OTHER HOUSING PROJECTS DEVELOPED BY THE ASSESSEE, THE RECEIPTS AND EXPENSES HAVE BEEN ROUTED THROUGH PROFIT & LOSS ACCOUNT AND THE INCOME HAS BEEN OFFERED SUBSEQUENT LY AS BUSINESS INCOME. IN THAT VIEW OF THE MATTER, ASSESSEES CLAIM THAT DEVELOPMENT RIGHTS ACQUIRED WERE FOR THE PURPOSE OF BUSINESS REQUIRES CONSIDERATION. WHILE CONCLUDING THAT THE INCOME FROM SALE OF DEVELOPMENT RIGHTS IS CAPITAL GAIN , SINCE , NEITHER LEARNED COMMISSIONER (APPEALS) NOR THE ASSESSING OFFICER HA VE PROPERLY APPRECIATED THE SUBMISSIONS OF THE ASSESSEE AND EXAMINED ALL THE ATTENDING FACTS AND MA TERIALS RELATING TO THE ISSUE AND HAVE MERELY HARP ED UPON THE ACCOUNTING TREATMENT GIVEN BY THE ASSESSEE AT THE TIME OF PURCHASE OF THE DEVELOPMENT RIGHT, WE ARE INCLINED TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO ADJUDICATION AFT ER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 10 . SINCE , THE APPLICABILITY OF SECTION 50C AND CLAIM OF INDEXATIO N ON COST OF IMPROVEMENT IS DEPENDENT UPON THE ULTIMATE OUTCOME OF THE NATURE AND CHARACTER OF THE INCOME RECEIVED BY THE ASSESSEE, WHETHER 13 SHRI PRAKASH GULABRAI CHAWLA B USINESS INCOME OR CAPITAL GAIN , W E ALSO RESTORE TH ESE ISSUE S TO THE ASSESSING OFFICER FOR DENOVO ADJUDICATION DEPENDING UPON HIS DECISION ON THE NATURE AND CHARACTER OF THE INCOME RECEIVED FROM SALE OF DEVELOPMENT RIGHT. CONSEQUENTLY, GROUNDS RAISED ARE AL LOWED FOR STATISTICAL PURPOSES. 11 . IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN C OURT ON 19.08.2019 SD/ - MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 19.08.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI