TaxTMI 
TaxTMI 
TaxTMI 
2013 (12) TMI 307
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....; (b) The Commissioner of Income lax (Appeals) failed to see that the said amount was received towards cancellation of development agreement and towards damages and therefore a capital receipt not liable to tax. 3. (a) The Commissioner of Income-tax (Appeals) ought to have seen that the Assessing Officer is not justified in considering Rs. 11,00,000 received by the assessee on February 28, 2008, towards handing over of possession of property as part of sale consideration and computing the long-term capital gains. (b) The Commissioner of Income-tax (Appeals) ought to have seen that since the said amount of Rs. 11,00,000 was received on February 28, 2008, for handing over possession of property and not as sale consideration the same cannot be considered as part of sale consideration while computing the long-term capital gain. 4. The Commissioner of Income-tax (Appeals), in the alternative, ought to have seen that if the provisions of section 51 are applied (as suggested by the Assessing Officer) the negative value of Rs. 1,95,65,840 out of forfeited deposit of Rs. 2,00,00,000 after a....
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....rred to the details of payment amounting to Rs. 13 crores made by the said company, as per the said agreement of sale and irrecoverable power of attorney dated February 18, 2005 and further observing that the assessee has handed over the possession of the said property to the said vendors, he noted that there is a transfer of the said land within the meaning of the provisions of section 2(47) of the Act. 5. Referring to the provisions of clauses (1), (5) and (6) of the said agreement of sale, the Assessing Officer noted that the assessee had received almost full consideration at the time of execution of the said agreement of sale and irrevocable power of attorney on February 18, 2005. He further noted that in its balance-sheet, as on March 31, 2005, under the head "Current liabilities", the assessee has shown receipt of an amount of Rs.15,76,26,000 as advance against "sale of property". He noted from the above, it shows the entire amount including the advances paid by the original developers of the same group, is nothing but the sale consideration for the said land. 6. The Assessing Officer further noted that the claim of the assessee, that possession of the said land was not giv....
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....d section during the previous year, the Assessing Officer held that the capital gains arising from sale of transfer of the said property shall be assessed to tax in the hands of the assessee for the assessment year 2005-06. 8. Since the said land in question was acquired by the assessee before April 1, 1981, after taking into account the market value per sq. yd. of such land at Rs. 60, on the basis of information collected from the concerned SubRegistrar, the Assessing Officer estimated cost of acquisition of the said land measuring to 7236 sq. yds. at Rs. 4,34,160 and accordingly, the indexed cost of acquisition during the year at Rs. 21,57,775. Since on transfer of such land, the assessee has received total sale consideration at Rs.15,77,26,000, the Assessing Officer computed the capital gain at Rs.15,55,68,225 and thus held that the same shall be added to the income of the assessee. 9. Further, the Assessing Officer noticed that the returned loss of Rs.34,44,373 claimed by the assessee in the return, includes a sum of Rs.29,42,288 towards payment of keyman insurance. Since, there was no business during the previous year the Assessing Officer held that the same shall be disallo....
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....ores given by the developers, in view of the fact that they have not complied with the terms of development agreement. Further, the developers have also paid Rs. 16,26,000 and Rs. 50,00,000 on January 24, 2005 and February 15, 2005 respectively as damages for cancelling the development agreement. 12. He submitted that there is no specific clause in the development agreement for the forfeiture of deposit, as such the forfeiture of refundable deposit of Rs. 2 crores is for non-performance of contract by the developers within the stipulated time and it cannot be considered as part and parcel of sale consideration. Stating that the said deposit of Rs. 2 crores was given by Sri G. S. Gupta, Smt. Saritha Gupta and M/s. Vansh Builders, the authorised representative contended that the same was forfeited for non-performance of development agreement within the stipulated time by the developers and the same has nothing to do with the sale consideration. The authorised representative submitted that it is only a mere coincidence that the property was sold to G.S.G. Builders P. Ltd., who is one of the parties to the development agreement. It was further submitted, in the said agreement of sale ....
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..../deposit, forfeited for non-performance of a contract is not a revenue receipt, but only capital receipt. Therefore, applying the provisions of section 51 of the Act, after deducting Rs. 2 crores from an amount of Rs. 4,34,160 towards cost of property as on April 1, 1981, it gives a negative figure of Rs. 1,95,65,840. The authorised representative submitted that excess amount received over and above the cost is to be ignored and is to be held as capital receipt only. It was stated, even if the provisions of section 51 are applied, the negative value of Rs.1,95,65,840, out of forfeited deposit of Rs. 2 crores, after adjusting the cost of acquisition of Rs. 4,34,160, shall have to be ignored for the purpose of computing capital gains. With the above submissions, the authorised representative contended that the amount received by the assessee towards sale consideration is only Rs. 13 crores, but not Rs. 15,77,26,000 as considered by the Assessing Officer, while computing the capital gains for this assessment year in the assessment. Further the authorised representative relied on the Tribunal order in the case of Smt. Smita N. Shah v. Joint CIT [2005] 94 ITD 492 (Mum). 14. On the othe....
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....nnot be considered as part and parcel of sale consideration. He submitted that vide clause (vi) of the said agreement of sale dated February 18, 2005, while cancelling the earlier development agreement, it has been made clear that both parties shall be deemed to have fulfilled all their obligations to each other and neither party shall be entitled to make any claim on the other in respect of the contractual obligations. He emphasised on the following stipulations made in the said clause : "Due to various unforeseen reasons, the owners and original developers are presently desirous of superseding the earlier documents which shall be deemed to have been cancelled hereby in respect of all continuing obligations of either parties to the other and both parties, that is to say, the owners and the original developers hereto shall be deemed to have fulfilled all their obligations to each other and neither of the parties shall be entitled to make any claims on the other in respect of the contractual obligations of any other parties, i.e., the owners, original developers and purchaser." 17. The Departmental representative submitted that from....
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....cheques dated January 11, 2005 and February 15, 2005 have not been admitted by the assessee in the said agreement of sale dated February 18, 2005. The Departmental representative submitted that from the dates of such cheques, it clearly shows that the same were issued by the said developers prior to the said agreement of sale executed on February 18, 2005. Further, though it has been contended that such payment of Rs. 66,26,000 was towards damages, having regard to the clear provisions contained in clause (vi) of the said agreement of sale, there is no merit in such claim. Rather, in view of such clause (vi), it clearly shows that the said amount of Rs.66,26,000 was paid by the said developers including the purchaser, only as part of sale consideration in respect of the said property. 20. As regards further receipt of Rs. 11,00,000 stated to be received on February 28, 2008 is concerned, the Departmental representative submitted that the assessee has submitted that since the said amount was received later and not during the previous year under consideration, the same cannot be considered as part of sale consideration. The Departmental representative submitted that in the entire ci....
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....(Rs.) 27.7.2004 to 6.1.2005 6,00,00,000 17.2.2005 (a) 6,50,00,000 (b) 50,00,000 Total 13,00,00,000 23. The assessee also received an amount of Rs. 2,66,26,000 vide agreement dated December 26, 2001. Further the assessee received an amount of Rs.11 lakhs on February 28, 2008. Now, the contention of the authorised representative is that this amount of Rs. 2,66,26,000 + Rs. 11 lakhs (Rs.2,77,26,000) cannot be treated as part of sale consideration for determining the capital gain and only Rs. 13 crores should be considered as consideration received towards transfer of the property at 8-3-949/1, Punjagutta, Hyderabad. We find no force in this argument. It is to be noted that all the parties to the transaction are interrelated. The assessee made an attempt to reduce the tax. This is evident from certain clauses of the agreement dated February 18, 2005 which is a sale and irrevocable power of attorney. Clause No. (1) and clause No. (5) read as follows : "Due to various unforeseen reasons, the owners and original developers are presently desirous of superseding the earlier documents which shall be deemed to have....