TaxTMI 
TaxTMI 
2010 (5) TMI 575
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....ani under the name and style of Skylark Build Shree Sai Janta Colony (Ghatkopar) providing that the profit and loss of the partnership firm will be shared by the assessee at 50 per cent and by other four partners collectively at 50 per cent. The spent a sum of Rs. 23,63,549 towards development expenses of plot at Ghatkopar, which rights were transferred by the assessee to the firm. All the initial steps for obtaining necessary permission, formation of tenants association etc. were done by the assessee. As per clause 7 of the partnership deed dated 17-4-2003 the assessee brought in the development rights entrusted to him as capital which were valued by the firm at Rs. 30,00,000. This amount was credited to his capital account. Apart from that the assessee was also reimbursed a sum of Rs. 24.25 lacs by the firm towards the development expenses incurred by him. On 28-4-2003 the assessee retired from the partnership firm and he was given a sum of Rs. 54.25 lakhs in total as retirement consideration. Clause No. 3 of the retirement deed provides that in addition to the amount in terms of money, the continuing partners agreed that the redevelopment of the property would be done by them an....
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....llotted. Later, the assessee's counsel agreed to be taxed on additional income to be determined by valuing the total area of 7707 sq.ft. at the rate of Rs. 500 per sq.ft. This submission did not find favour with the Assessing Officer. He outrightly rejected the primary contention of the further tax liability arising at the time of sale of shops/flats. He went ahead with the determination of the valuation of the premises to be allotted to the assessee in the project to be constructed on the Ghatkopar plot. Summons were issued to the continuing partners of the firm. Shri Mohan Singhani, partner of the firm attended the proceedings whose statement was recorded. In response to question No. 8 he stated that the firm was expecting the booking rate of Rs. 2,500 per sq.ft. He further intimated that flat No. 804 with carpet area of 788.25 sq.ft. was booked for Rs. 23,48,750 giving the rate of Rs. 2,979 per sq.ft. Considering the above facts and after allowing the margin of profit at about 10 per cent from the expected booking rate of Rs. 2,500, the Assessing Officer estimated the rate of Rs. 2,250 per sq.ft. Since the total area allotted to the assessee was 7,709 sq.ft., an addition of Rs. ....
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.... Whether assessee's admission to and retirement from firm was genuine or ploy 4. It is seen that the assessee entered into partnership on 17-4-2003 with the four persons named above by contributing rights in Ghatkopar plot which were valued at Rs. 30 lakhs and such amount was credited to his capital. On 28-4-2003 he retired from the firm and obtained a sum of Rs. 30 lakhs as capital and Rs. 24,25,000 as development expenses which were incurred by him to the tune of Rs. 23,63,549. A copy of deed of retirement dated 28-4-2003 is available at pages 52 to 65 of the paper book. On the perusal of such retirement deed it is found that the stamp papers for this retirement deed were purchased on 17-4-2003, which happens to be the date on which the said firm was constituted. Apart from transferring of development right of Ghatkopar plot in the partnership firm, there is no evidence to demonstrate that the assessee was in any manner involved in the activities of the said partnership firm. Further, no material has been placed which could vindicate the assessee's stand that he became a genuine partner in the firm. It is a simple and straight case of sale of development right of Ghatkopar plot....
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.... was to be charged to tax under the head 'Capital gains' in view of section 45(3) and 45(4). He further held that the quantification of income in respect of shops and flats would be done only when the property was handed over and tax would be charged accordingly in such later year. 6. It is found that the division of finding given by the learned CIT(A) in two parts , viz., assessment of income on conversion of stock-in-trade and assessment of income on retirement of partner is basically based on the premise that the events of firm taking the assessee as partner and then his subsequent retirement from the firm, were genuine and bona fide. In view of our decision given supra holding that the assessee's induction in the firm and retirement therefrom was not genuine, the finding given by the learned CIT(A), therefore, gets automatically vacated. 7. The learned A.R. has candidly admitted before us that the assessee was a builder and the rights in Ghatkopar plot was his stock-in-trade, on which development expenses to the tune of Rs. 23.62 lacs were also incurred. It is trite that any profit or gain on the transfer of stock in trade is regarded as business income and there is no questi....
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....ransferred its right in Ghatkopar plot in the current year for consideration of Rs. 30,61,451 (net) and further right in shops/flats in the building to be constructed on such plot. The entire consideration comprising of right in shops/flats is in lieu of the transfer of development right which event took place in the instant year. The view point of the learned A.R. that no income can be said to have accrued to the assessee in the current year towards right in shops/flats, is devoid of any merits for the reason that the income has accrued even though it did not become due. There is difference between the income accruing and becoming due. It accrues when the right to receive is acquired and it becomes due when the event of exercising such right gets ripe. For instance if the goods worth Rs. 100 are sold in the year one for a consideration of Rs. 125 with the understanding that a sum of Rs. 50 shall be paid in the year one and Rs. 75 in the year two, the sale consideration shall remain at Rs. 125 and profit of Rs. 25 shall be determined in the first year itself, notwithstanding the fact that a sum of Rs. 75, though accrued in the year one shall become due in the year two. In certain c....
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.... learned A.R. with vehemence, is about the valuation. He contended that the Assessing Officer was not justified in adopting the value of Rs. 2250 per sq.ft. It was stated that the price actually realized by the assessee on subsequent sale of such properties should be substituted. We are again unable to agree with this view canvassed on behalf of the assessee for the reason that the rate of Rs. 2,250 per sq.ft. estimated by the Assessing Officer is not in the air. In fact it is based on the statement given by Shri Mohan Singhani, partner of the firm who gave the estimated booking rate of Rs. 2,500 per sq.ft. and actual rate at which one flat was booked at the rate of Rs. 2979 per square feet. Rather the Assessing Officer was reasonable in allowing further discount of 10 per cent for determining the rate of Rs. 2,250 per sq.ft. The contention of the ld. AR that the actual amount realized in subsequent years be adopted, cannot be accepted for the obvious reason that only the material available with the Assessing Officer at the time of assessment can be considered. If the flats/shops are subsequently sold at lower or higher rates, that would form the subject matter for determination of....