TaxTMI 
TaxTMI 
TaxTMI 
2014 (1) TMI 1079
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....ompany developed real estate project "Mangala" at Belapur, Navy Mumbai. The assessee filed return of income declaring total income of Rs. 58,90,690/-. On total sales of Rs. 11.95 crores in "Mangala" Project, the assessee has shown net profit of Rs. 66.65 lakhs, including rental income of Rs. 26.34 lakhs and miscellaneous income of Rs. 81,127/-. 3. The Assessing Officer has stated that the assessee acquired development rights for development of "Mangala" project from M/s. SVA Securities Pvt. Limited under an agreement dated 18.1.2005. Prior to the said development agreement, the assessee entered into a Memorandum of Understanding (MOU) dated 7.7.2004 with one M/s. Kaypee Developers to provide certain services for consideration mentioned thereon being 9 flats and 2 shops in the project "Mangala". 4. As per the agreement with M/s. SAV Securities Pvt. Ltd., the assessee- company had to handover duly constructed 20 flats and 2 shops out of total constructed 84 flats and 8 shops to M/s. SAV Securities Pvt. Limited. However, after completion of project, only 6 shops were constructed out of which assessee-company retained 4 shops and 2 shops were given to M/s. SAV Securities Pvt. Ltd. 5....
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....t/Commercial premises and other documents and papers and to attend all legal matters and Court matters arising out of constructing building on the said Plot and to finalize various contracts to be entered into by Party of first Part with others (like Labour Contract etc.) in relation to construction of the building on the said Plot". 7. The Assessing Officer has stated that as per information and the signatures of the Memorandum of Association, the partners of M/s. Kaypee Developers are Shri Satish Sabhlok and Shri Surinder Sabhlok are also active directors of the assessee-company and they are getting remuneration of Rs. 3 lakhs each from assessee-company. Shri Surinder Sabhlok is also a shareholder having 2500 shares in the assessee-company. The AO has stated that the MOU is signed on 7.7.2004 for obtaining permission for construction of building, change of user of plot from commercial to residential-cum-commercial, ULC, NOC, etc. from CIDCO, NMMC or other concerned authorities. But necessary permission from CIDCO for change of user of said plot was obtained on 15.3.2004. Therefore agreement between the assessee- company and M/s. Kaypee Developers is a fabricated/make belief inst....
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....nto an agreement with one M/s Kaypee Developers for development of the said plot to certain terms and conditions. In the said firm two of the directors/ shareholders of the appellant company are equal partners. * SVA securities Pvt Ltd and M/s Kaypee Developers entered into with MOU dated 4/11/2003 wherein the terms and conditions of development of plot number 84 of sector 15 were formalised. Under the said arrangement M/s Kaypee developers would develop the said plot by constructing premises thereon. It was agreed that 25% of the constructed premises would be granted to the other party as consideration for grant of development rights. M/s Kaypee developers would retain the balance 75% of the constructed premises and appropriate the entire sale consideration in respect thereof. The cost of construction was to be borne by M/S Kaypee Developers only. As evidence a copy of agreement dated 4/11/2003 has been submitted. A reading of the MOUs shows that the salient features are the same as reproduced above. I find that the assessing officer's order is silent regarding this particular M0U which is the base point of the whole case. It is this agreement through which M/s Kaypee Developers,....
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....y the partner of M/s Kaypee Developers on behalf of SVA Securities Pvt Ltd. This letter too finds no mention in the order of the assessing officer. The above issues are all indicative of the fact that M/s Kaypee Developers had hoped any interest in the plot of land even before the appellant company came into the picture and had started working on it. The permission had been granted by CIDCO to change the use in respect of the said plot had been obtained by M/s. Kaypee Developers on 15/3/2004: In copies of the above permission/sanction obtained clearly shows that it was due to the efforts of M/s. Kaypee Developers that the said permission was given. The A.O. has mentioned this letter in his order but not the chronology leading to it. * It is only after this development that M/s Kaypee Developers approached the appellant company and offered to transfer the said plot in favour of the appellant on certain terms and conditions. Accordingly an MOU was signed on 7/7/2004 and 18/1/2005 whereby M/s. Kaypee Developers assigned all its rights obtained under MOU dated 4/11/2003 in favour of the appellant and requested SVA securities Private Limited to execute the development agreement in favo....
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....ot by the appellant company. In doing so all the agreements made during the course of this period would have to be read together and not in isolation. Therefore the agreement dated 7/7/2004 would have to be seen as a continuation of the previous agreements made between SVA Securities and M/s Kaypee Developers as detailed above in the order. As these agreements have not found to be invalid the provisions contained in them would need to be looked into and accepted. 3.8. A reading of the agreement shows that in the development of the plot of land there were to be 84 flats and 6 shops. Accordingly SVA Securities Pvt. Ltd. was to be given 20 flats and 2 shops as consideration for grant of development rights, M/s Kaypee developers was to receive 9 flats and 2 shops as consideration for services performed, benefits granted and the balance was to remain with the appellant company as developer. It is logical to presume that each party in the project had involved itself in the project for profits and gains. When, the appellant had not entered the project deal was between SVA Securities Pvt. Ltd. and M/s Kaypee Developers wherein M/s Kaypee Developers' was to appropriate the profits by selli....
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....ly required to look into the authenticity of the expenditure and the fact that it was for business purposes and that correct profits have been declared in the agreement dated 7/7/2004 the appellant had agreed to pay a sum of Rs.1,44,85,000/ that is the value of the units to M/s Kaypee Developers for the services rendered by them. The AO was required to consider this amount only. So even if the disallowance was required to be made the amount to be considered has to be Rs.1,44,85,000/- only. The fact that the units are sold at a high rate in the, subsequent years would have no bearing on the matter. Further it is seen that the A.O. has' disregarded the transfer of units by the appellant to M/s.Kaypee Developers and considered their face value as profit of the appellant. As per the records the appellant has sold 5 units on behalf of M/s: Kaypee. Developers and has transferred the consideration received immediately to M/s. Kaypee Developrs. . This action has been taken by the appellant as the persons who had purchased the property were desirous of executing the agreement with the developer only. Documents submitted shows that the balance 6 units have been transferred to the firm by the....
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....gwith the copies of the documents of the services rendered by Kaypee Developers to the assessee giving only 7 days time. He submitted that all details in respect of the said project and services rendered by Kaypee Developers were mentioned in MOU with the AO and no such additional documents were filed before ld. CIT(A) which could be said to be additional evidence. He submitted that ld. CIT(A) has considered the facts in its entirety, which the AO failed to consider and deleted said addition justifiably. He submitted that the order of ld. CIT(A) be confirmed 12. In respect of ground No. 2 taken by the Department regarding considering additional evidence by ld. CIT(A) in violation of Rule 46A of Income Tax Rules, 1962,(the Rules ), it is relevant to state that ld. DR could not point out evidences which were considered relevant for deciding the issue by ld. CIT(A) and same were not available before the AO. Ld DR could not specify the additional documents which were admitted by ld. CIT(A) without giving opportunity to the AO which were material to decide the issue under consideration. He agreed that documents mentioned at Sr.No.5 of paper book which is a letter of authority given by ....
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.... change of use of plot from corporate office to that of residential- cum-commercial and also obtained permission for transfer of plot to a third party as well as extension of time for development and construction of said plot. Said facts are supported by the copy of the letter dated 5.2.2004 written by M/s. SVA Securities Pvt. Ltd. to CIDCO authorising partners of the Kaypee Developers to liaison on their behalf. Ld. CIT(A) has rightly stated that the AO has not stated above facts in the assessment order. Subsequently Kaypee Developers approached the assessee-company and offer to transfer the said plot in favour of the assessee on certain terms and conditions. Hence, assessee-company got involved in the project as it found to be commercially viable. We are of the considered view that ld. CIT(A) has rightly stated that said facts amply proves that transaction between the assessee-company and Kaypee Developers is purely commercial transaction. Genuineness of the transaction cannot be doubted merely because the partners of Kaypee Developers are also director of the assessee-company. We agree with Ld. CIT(A) that the assessee has placed on record documents which establishes and substan....