DCIT-24(3), MUMBAI V. M/S. SHIVALIK ESTATE INVESTMENT CO., MUMBAI

ITA 6210/MUM/2008

• Counselvise Citation: 621019914 RSA 2008
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 28-04-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 20-10-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: D V LAKHANI
• Keywords: Capital asset; Business income; Set aside
• Section: 148; 143(1)

Judgement Text

1 6210/MUM/2008 (ASST YEAR 2000-01) IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI E EE E BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI P M JAGTAP, AM & P M JAGTAP, AM & P M JAGTAP, AM & P M JAGTAP, AM & SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM 6210/MUM/2008 (ASST YEAR 2000-01) THE DY COMMR OF INCOME TAX 24(3), MUMBAI VS M/S SHIVALIK ESTATE INVESTMENT CO SHIVAM CHAMBERS 3 RD FLOOR NEXT TO AUTORIDERS S V ROAD GOREGAON (W) MUMBAI 62 ( (( (APPELLANT APPELLANT APPELLANT APPELLANT) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.AAFCS8449H AAFCS8449H AAFCS8449H AAFCS8449H A SSESSEE BY SHRI D V LAKHANI REVENUE BY SHRI B ENTHIL KUMAR/DR PER PER PER PER VIJAY PAL RAO, J VIJAY PAL RAO, J VIJAY PAL RAO, J VIJAY PAL RAO, JM MM M THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 14.8.2008 OF THE CIT(A)-XXIV, MUMBAI FOR THE AY 20 00-01. 2 THE REVENUE HAS RAISED VARIOUS GROUNDS IN THIS AP PEAL; HOWEVER, THE ONLY ISSUE ARISES FOR OUR CONSIDERATION AND ADJUDICATION IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) IS JUSTIFI ED IN DELETING THE ADDITION OF RS. 3 CRORES MADE BY THE AO TREATING THE SAID AMOUN T RECEIVED BY THE ASSESSEE IN PURSUANT TO AGREEMENT FOR TRANSFER OF DEVELOPME NT RIGHTS AS INCOME FOR THE YEAR UNDER CONSIDERATION.. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE FILED ITS RETURN OF INCOME ON 30.10.2000 FOR THE AY UNDER CONSIDERATION AND OF FERED NIL INCOME. THE RETURN WAS PROCESSED U/S 143(1) AND SUBSEQUENTLY THE AO IS SUED NOTICE U/S 148 ON THE REASONS THAT AN INTIMATION FROM THE DCIT, CENTRAL CIRCLE WAS RECEIVED THAT THE 3 6210/MUM/2008 (ASST YEAR 2000-01) THE AY 2000-01 AFTER BOOKING THE EXPENSES AGAINST T HE SAME. HE RELIED ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE REPORTED IN CHATURBHUJ DWARKADAS KAPADIA VS CIT REPORTED IN 260 ITR 491 AN D SUBMITTED THAT THE DATE OF TRANSACTION SHOULD BE THE DATE OF AGREEMENT WHE REBY THE ASSESSEE HAS TRANSFERRED THE DEVELOPMENT RIGHTS AND ACCORDINGLY, THE ENTIRE INCOME IS ALLOWABLE FOR THE YEAR UNDER CONSIDERATION. 3.1 THE LD AR OF THE ASSESSEE, ON THE OTHER HAND, HAS SUBMITTED THAT THE ENTIRE CONSIDERATION HAS BEEN TAXED IN THE AY 2001- 02. HE HAS REFERRED THE ASSESSMENT ORDER FOR AY 2001-02 AND SUBMITTED THAT THE ASSESSEE HAD FILED THE RETURN DECLARING THE TOTAL INCOME AT RS. 1,91,80,63 0/, WHICH HAS BEEN ACCEPTED BY THE AO WHILE PASSING THE ASSESSMENT U/S 143(3). THUS, THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT ONCE THE ENTIRE SALE CO NSIDERATION HAS BEEN OFFERED AS THE INCOME FOR THE AY 2001-02, THEN THERE IS NO JUSTIFICATION IN TREATING THE PART OF THE SAME AS INCOME OF THE SAME ASSESSMENT Y EAR UNDER CONSIDERATION. THE LD AR OF THE ASSESSEE FURTHER CONTENDED THAT SI NCE THE SALE CONSIDERATION IS ASSESSED AS BUSINESS INCOME OF THE ASSESSEE; THEREF ORE, PROVISIONS OF SEC. 2(47) (V) OF THE I T ACT IS NOT APPLICABLE AS TRANSFER OF DEVELOPMENT RIGHTS ARE NOT IN THE NATURE OF CAPITAL ASSET. HE FURTHER CONTENDED THAT THE ASSESSEE DID NOT RECEIVE THE ENTIRE AMOUNT OF RS. 6,07,12,000/- IN THE AY 20 01-02 BUT ONLY RECEIVED RS. 3 CRORES AND THAT TOO AS AN ADVANCE RECEIVED BY THE A SSESSEE IN PURSUANT TO THE AGREEMENT DATED 21.9.1999. UNDER THIS AGREEMENT, DEVELOPMENT RIGHTS HAVE BEEN GIVEN TO M/S STABLE EVERSHINE BUILDERS PVT LTD FOR A CONSIDERATION OF RS. 7,55,00,000/-. THE PAYMENT WAS TO BE MADE ON DI FFERENT DATES. HE REFERRED CLAUSE 14 OF THE AGREEMENT AND SUBMITTED THAT POSSE SSION OF THE LAND WAS TO BE HANDED OVER TO THE STABLE EVERSHINE BUILDERS PVT LT D., ONLY ON THE RECEIPT OF THE 5 6210/MUM/2008 (ASST YEAR 2000-01) ONLY WHICH WAS PAYABLE AS PER CLAUSE 2 OF THE AGREE MENT. THUS, THE SAID AMOUNT OF RS. 3 CRORES RECEIVED BY THE ASSESSEE IS UNDOUBTEDLY PART OF THE CONSIDERATION AND DOES NOT REPRESENT ANY ADVANCE OR EARNEST MONEY. 5.1 AS PER CLAUSE 4 OF THE AGREEMENT, THE DEVELOPER M/S MADHU FANTASY LAND PVT LTD WAS PUT TO POSSESSION OF THE PROPERTY FOR T HE PURPOSE OF DEVELOPMENT ONLY. THUS, TILL THE ENTIRE PAYMENT WAS MADE, THE D EVELOPER WAS NOT GIVEN ABSOLUTE RIGHT AND TITLE OVER THE PROPERTY TO TRANS FER THE SAME TO A THIRD PARTY. 5.2 HOWEVER, AS PER CLAUSE 9 TO 14, OF THE AGREEMEN T, ONLY AFTER THE ENTIRE PAYMENT OF THE CONSIDERATION, THE DEVELOPER WOULD B E ENTITLED TO SELL OR ALLOTMENT OF THE FLATS, SHOPS, GARAGES, PREMISES ET C. IN OTHER WORDS, THE DEVELOPER WOULD BE ENTITLED TO SELL THE DEVELOPED P ROPERTY ONLY AFTER THE PAYMENT OF THE ENTIRE CONSIDERATION DUE AS PER THE AGREEMENT. 5.3 AS PER CLAUSE 3 OF THE AGREEMENT, THE ASSESSEE IS ENTITLED TO INTEREST @ 2% PER MONTH WITH QUARTERLY REST S IN THE EVENT OF DELAY OF ANY OF THE PAYMENT STIPULATED IN THE AGREEMENT. THERE IS NO PROVISION IN THE AGREEMENT FOR CANCELLATION OR REVOCATION OF THE AGREEMENT EITHER OF THE PARTIES WHICH MEANS THE PARTIES TO THE AGREEMENT AGREED TO HAVE THE RIG HT OF PERFORMANCE OF THE AGREEMENT AGAINST EACH OTHER AND TO CHARGE INTERES T ON DELAYED PAYMENT, IF ANY. WHEN THE AGREEMENT WAS FINALLY PERFORMED BY TH E PARTIES, THEN THE CONSIDERATION DUE AND RECEIVED AS PER THE PAYMENT C LAUSE WOULD BE THE INCOME FOR THE AY WHEN IT BECAME DUE AND RECEIVED BY THE A SSESSEE. SINCE THE ASSESSEE WAS HAVING ONLY BENEFICIAL INTEREST IN THE LAND, AS ACQUIRED VIDE AGREEMENT DATED 22.1.1994, THE CONSIDERATION RECEIV ED BY THE ASSESSEE WAS FOR 6 6210/MUM/2008 (ASST YEAR 2000-01) TRANSFER OF THE SAID INTEREST IN THE SHAPE OF DEVEL OPMENT RIGHTS, WHICH IS NOTHING TO DO WITH THE TRANSFER OF TITLE OF THE LAND IN QUE STION. THEREFORE, THE PAYMENT OF RS. 3 CRORES BEING CONSIDERATION RECEIVED BY THE AS SESSEE IS ASSESSABLE IN THE YEAR UNDER CONSIDERATION. EVERY ASSESSMENT YEAR IS A SEPARATE ACCOUNTING UNIT AND THE INCOME HAS TO BE COMPUTED SO AS TO GIVE TRU E AND CORRECT RESULT OF ACCOUNTINGS PERIOD OF 12 MONTHS RELEVANT TO THE ASS ESSMENT YEAR. THUS, THERE IS NO JUSTIFICATION FOR NOT OFFERING THE SAID INCOME F OR TAXATION ON THE GROUND THAT IT WAS OFFERED IN THE SUBSEQUENT YEAR. WE CLARIFY THAT PROPORTIONATE EXPENDITURE SHALL BE ALLOWED AGAINST THIS INCOME. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORED THE ORDER OF THE AO ON THIS ISS UE. THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY ALLOWED. 6 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED. ORDER PRONOUNCED ON THE DAY OF 27 TH MAY 2011. SD/- SD/- ( (( ( P M JAGTAP P M JAGTAP P M JAGTAP P M JAGTAP ) )) ) ACCOUNTANT MEMBER ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 27 TH , MAY 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI