TaxTMI 
TaxTMI 
2013 (9) TMI 639
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....h action it came to the knowledge of the Department that the assessee entered into a sale agreement for sale of 15 acres 39 guntas of land to Sri B. Mohan Reddy for a consideration of Rs. 2.24 crores. Out of this, the assessee has received Rs. 8 lakhs as advance consideration on February 3, 2007 and the balance amount is payable within a period of six months or in the event of default the vendee shall be liable to pay an interest at 18 per cent. for a maximum extended period of one month. The agreement of sale is duly registered on February 25, 2007. According to the Assessing Officer there is a relinquishment of right over the asset by the assessee to the purchaser. Being so, he was of the opinion that there is a transfer in view of the provision of section 2(47) of the Act and levied tax on capital gain accordingly. On appeal the Commissioner of Income-tax (Appeals) observed that against the agreed total sale consideration of Rs. 2,24,00,000, only a paltry advance of Rs. 8 lakhs was received by the assessee. The Assessing Officer has considered the transaction as "transfer" within the meaning of section 2(47) of the Income-tax Act on the ground that the vendor had agreed....
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....e assessee. He also observed that there was no extinguishment of right of the assessee in the said property. According to the Commissioner of Income-tax (Appeals), the assessment order does not throw any light that there was any extinguishment of right of the assessee in the property referred to. It is because the assessee remained the legal owner and there was no extinguishment of any type by an act of God or operation of law. The Assessing Officer has invoked the provision of section 2(47) of the Income-tax Act stating that there was relinquishment of right by the assessee. Section 2(47) does not speak of "relinquishment of right" at all. Either it has to be "relinquishment of asset" or "extinguishment of right therein". Thus, considering the fact in totality, the Commissioner of Income-tax (Appeals) was of the opinion that there was no justification on the part of the Assessing Officer for invoking the provision of section 2(47) of the Income-tax Act simply on the basis of the agreement of sale since none of the conditions relating to the "transfer" enumerated in section 2(47) were fulfilled. Otherwise also, as stated by the assessee, no prudent person shall hand over the posse....
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....ace reliance on the order of the Delhi Tribunal in the case of ITO v. Smt. Satyawati Devi Verma [2010] 124 ITD 467 (Delhi) wherein it was held that the assessee having executed the agreement, which only contemplated the sale property to the purchaser on a future date on certain terms without transferring any right of ownership, and no possession of property is given or right to use the property or right to receive income arising in the property was also not given to the purchaser ; in such circumstances, it is not a transfer in terms of section 2(47) of the Income-tax Act, 1961. We also place reliance on the decision of CIT v. Rasiklal Maneklal (HUF) [1989] 177 ITR 198 (SC) wherein the apex court held, affirming the decision of the High Court, that there was neither an "exchange" nor a "relinquishment" and no capital gains arose from the transaction. An "exchange" involves the transfer of property by one person to another and reciprocally the transfer of property by that other to the first person. There must be a mutual transfer of ownership of one thing for the ownership of another. A "relinquishment" takes place when the owner withdraws himself from the property and abandons his ....
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....hands of the recipients. According to the learned authorised representative the assessee made total payment of Rs. 30 lakhs. The Commissioner of Income-tax (Appeals) allowed Rs. 25 lakhs and disallowed only Rs. 5 lakhs. There is no reason to sustain this Rs. 5 lakhs and the payment is not doubted only quantum is doubted though the payment was made by the account payee cheque. The Commissioner of Income-tax (Appeals) accepted the payment of Rs. 20 lakhs to M/s. Radha Realtors through memorandum of understanding dated July 28, 2007. He also accepted the payment of Rs. 5 lakhs to Mr. Vittal Reddy vide cheque No. 673835. However, only he doubted the payment of Rs. 5 lakhs to Syed Naser and Dilip Kumar. When the payment of this amount arose out of the same transaction, in our opinion, this payment alone cannot be disallowed. More so, all these persons had claimed the right over the property which the assessee dealt with by selling the same to DLF group of companies. At that time, they initiated civil litigation and this expenditure, in our opinion, it is incurred by the assessee on account of business and commercial exigencies for the purpose of business. The deletion of the addition by....
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....nce of Rs. 19,81,519 made by the Assessing Officer and confirmed by the Commissioner of Income-tax (Appeals) is justified. We have heard the parties. Admittedly, this expenditure was incurred not in the assessment year under consideration and it was related to the earlier 3 years. Being so, it cannot be said that it is allowable in this assessment year under consideration, as the DLF project was commenced vide memorandum of understanding entered on June 23, 2007. If it is incurred prior to the commencement of the business, and it is incurred not for carrying on the business of the assessee but for setting up the business. Accordingly it cannot be considered as business expenditure to allow the deduction. The addition is sustained. The next ground is with regard to sustaining disallowance of site-levelling expenditure at Rs. 13.90 lakhs. The brief facts of the issue are that during the assessment proceedings the Assessing Officer requested the assessee to furnish the details regarding site-levelling expenses. After verifying the details filed by the assessee the Assessing Officer found that Rs. 6,33,924 was paid to Lumbini Filling Stations towards fuel expenses and all the payment....
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....registration of the sale deed in respect of the scheduled land in favour of DLF, i.e., the second party directly from all land owners. The assessee was to ensure that there was a clear and marketable title to the land without any encumbrance. Thus it is clear from the memorandum of understanding that the responsibility of the assessee is limited to completion of the legal formalities for smooth transfer of land from the land owners/claimants to the purchasers, i.e., DLF group of companies. The memorandum of understanding does not speak anything specific regarding any site-levelling expenses or any other expenditure of similar nature. As per the paper book filed by the assessee the sale deeds had been executed in the month of August 2007 whereas most of the expenditure claimed by the assessee, as pointed out by the Assessing Officer, related to the earlier part of 2008. Further, the Assessing Officer has also referred to the report of the Valuation Officer who had confirmed that no such developmental activity had actually taken place. Thus considering the totality of the facts as emerging from the discussion made by the Assessing Officer in the assessment order, the claim of site-le....
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....ns show that the payments were made in connection with their services in respect of sale of property of Aravind Babu. The Assessing Officer observed that the land belonging to Aravind Babu group was undisputed and having clear title and the assessee-company had directly entered into memorandum of understanding dated March 25, 2007 with Aravind Babu for purchase of his lands and the memorandum of understanding was silent on any payment to be made to any sub-agents. The Assessing Officer further observed that the payments were made to the above parties in September and November 2007 and there were no agreements with the above parties for providing any service in connection with purchase of land for the Aravind Babu group. The Assessing Officer also observed that the assessee-company had not filed any evidence to prove that the above parties have admitted the above income in their tax returns. Accordingly, he disallowed the entire amount and added the same to the total income. The learned authorised representative submitted that in almost all real estate transactions involvement of intermediary agents/brokers is always there. The extent of business activity carried on by the ass....
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....s rendered and hence the claim of the commission agents cannot be allowable. No specific evidence relating to services rendered by these persons has been filed either during the assessment or appellate proceeding. Thus, the addition made by the Assessing Officer to the tune of payments made to ladies amounting to Rs. 87,00,000 is justified. The Departmental representative further submitted the it is not clear as to what services were rendered by the remaining parties, viz., J. Raghavendra Prasad, P. Nagaraju and A. Venkateswara Reddy. Further, the signature of J. Raghavendra Prasad and Sri A. Venkateswara Reddy as appearing in the receipt does not tally at all with the signature as appearing in the TDS certificates. Considering all this, the payments claimed to have been made by the assessee do not appear to be genuine. Hence, the payment of Rs. 71,00,000 made to J. Raghavendra Prasad and A. Venkateswara Reddy is treated as not genuine. Otherwise also, Sri A. Venkateswara Reddy in the money receipt had shown to have rendered services in relation to the property in Puppalaguda and Narsingi village. Since the assessee was not concerned with any land deal at Puppalaguda the que....
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.... of the value of the property bought and sold. In this case, during the course of search action, the Department found material in the form of receipts for payments made through account payee cheques to sub-agents to the tune of Rs. 1.70 crores and the same was seized. This payment was subjected to TDS. The subagents have filed their returns of income after payment of advance tax as applicable. Even during the course of investigation, the assessee placed necessary evidence before the investigating authority explaining the payment. Thereafter the assessee also filed acknowledgement for receipt of commission. Being so, the Department has not got anything on record to show that the payment is excessive or it is made to relatives of director of the assessee-company. We are not in a position to confirm the additions made by the lower authorities. Considering the facts of the present case we are of the opinion that the claim of the assessee has to be allowed placing reliance on the decision of the Supreme Court in the case of Malayalam Plantations Ltd. [1964] 53 ITR 140 (SC). The next ground is with regard to disallowance of architect fee at Rs. 19 lakhs. The facts of the case are that t....
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....d to TDS. The expenditure was incurred towards consulting services provided by the architect with regard to site plan, SEZ specific building plan. In our opinion the expenditure has to be allowed as business expenditure and the same is allowed. More so, the Department has not brought anything to show that the assessee has not incurred this expenditure for the purpose of the business and it is presumed that it is incurred for the purpose of business and the same has to be allowed. The next ground is with regard to disallowance of Rs. 4,96,562 with regard to technical expenditure. The assessee claimed the above expenditure but has not filed explanation regarding this expenditure and has also not filed proof for having spent this expenditure. This expenditure is relating to the earlier year and the same was disallowed. Before us also no evidence was produced by the assessee as a proof for incurring this expenditure wholly and exclusively for the purpose of business. Being so this ground is dismissed. The last ground is with regard to disallowance of expenditure of Rs. 28,99,100 towards video surveillance charges. The assessee claimed the expenditure of Rs. 35,72,100 towards video sur....
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....i). He also relied on the judgment of the Delhi High Court in the case of Vishwanath Khanna v. Union of India [2011] 335 ITR 548 (Delhi) and on the judgment of the Punjab and Haryana High Court in the case of CIT v. Ashok Kumar [2011] 334 ITR 355 (P&H). The learned Departmental representative submitted that adjustment of seized amount cannot be given and it cannot be treated as recovery towards advance tax and it has to be adjusted towards existing liabilities. According to the Departmental representative, the provisions of section 132B are applicable and it has to be adjusted towards existing liabilities of the assessee. After hearing both parties, we are of the opinion that the seized amount has to be adjusted in terms of section 132B of the Act. However, after adjusting existing liabilities, if any amount remains, the same has to be adjusted towards outstanding tax relating to the assessment completed under section 153A of the Act. Accordingly, we direct the Assessing Officer to recalculate the interest under sections 234A and 234B of the Act. In the result, I. T. A. No. 891/Hyd/2011 is partly allowed. Now, we will take up the Revenue appeal in I. T. A. No. 1018/HYD/ 2011. Th....