TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 743
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....tment of flats for a total consideration of Rs.74,88,500/-. The balance constructed area was shown by the assessee in the balance-sheet as closing stock at cost at Rs.29,07,000/-. In the return of income filed for the year under consideration on 31.10.2005, the income accrued from the sale of constructed area /flats was declared by the assessee as its business income. During the course of assessment proceedings, the AO noticed that the constructed area (flats) was surrendered by the assessee to the developer only for the total consideration of Rs.74,88,500/-. According to him, the said constructed area (flats) received by assessee from the developer was in the nature of capital asset in the hands of assessee and the income arising from transfer of the said asset was chargeable to tax as capital gains and not business income. He, therefore, brought to tax such income computed at Rs.28,12,500/-, after reducing the cost of the flats sold amounting to Rs.46,76,000/- from the sale consideration of Rs.74,88,500/-, in the hands of the assessee as Short Term Capital Gains (STCG) in the assessment completed u/s 143(3) of the Income Tax Act, 1961 (the Act) vide order dated 28.12.2007. 4. Ag....
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.... of 8435 sq.ft was sold by the appellant in AY 2005-06 and AY 2006-07 and the income arising from sale, after reducing the cost of Rs.75,63,000/- was offered for tax as income from business in AY 2005-06 and AY 2006-07. Summarized detail regarding year of sale and area sold in each year is as under :- 8. The appellant incurred the following expenses to complete the entire project. The expenses claimed by the assessee pertaining it to AY 2005-06 are as under : S No Particulars Amount 1 Sundry expenses 75900 2 Interest to bank 7283 3 Telephone expenses 2918 4 Bank charges 447 5 Travelling expenses 68500 6 Stamp duty 106410 7 salary 180000 8 Interest to partner 785133 Expenses as mentioned above are very much necessary to carry out the work just to approach to the lawyer, advocate and chartered accountant. Interest to partners is given on capital balance account, which is clearly mentioned in the balance sheet filed along with return of income. The expenses are admissible under the IT Act to earn the income shown in the income tax return of the assessee; Even the AO is himself considering he cot of flats sold after adjusting the closing stock valued as per normal ....
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....ment year 2004-05 against which the appellant preferred an appeal and finally the Hon'ble ITAT, Mumbai, in para No.4 of is order decided that this amount pertains to AY 2005-06 as per the terms and conditions of clause 3 of clarification agreement dated 31.12.2004 and also on the basis of letter given by M/s Chintamani Enterprises, the builder. It is also seen from para No.4 of the said order the assessee has exercised not to refund the interest free deposit and instead had requested the developer to deduct and area of 1950 sq. ft. from their share of 37% of total permissible built up area i.e. 8435 sq. ft. to which appellant was entitled in terms of clause 3 of the development agreement entered by the appellant with the developer; (iii) However, the appellant has finally received total 8635 sq. ft area in toto which he has sold also in the assessment year 2005-06 and 2006-07. The appellant sold 5270 sq. ft in AY 2005-06 and balance 3165 sq. ft in assessment year 2006-07 which are reflected in detail given by appellant itself in the ground of appeal No.7; (iv) Then it is also a matter of record that the appellant has not refunded Rs.25,00,000/- received as security deposit till t....
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.... by the assessee in respect of this difference in rate, the amount of Rs.4,27,050/- (1950 st.ft. x 219 per se.) was added by the ld. CIT(A) enhancing the income of the assessee to that extent. The ld. CIT(A) also upheld the action of the AO in treating the income arising from the sale of constructed area/allotted flats as STCG of the assessee and consequently confirmed the disallowance made by AO on account of various expenses claimed by assessee under the head "Profit and Gains of the Business or Profession". 7. Aggrieved by the order of ld. CIT(A), the assessee has preferred this appeal before the Tribunal on the following grounds : "1. On the facts and in the circumstances of the case and in law, the CIT(A) was not justified in confirming the order of ITO and in treating the business income of the appellant as a short term capital gain; 2. On the facts and in the circumstances of the case and in law, the CIT(A) was not justified in not allowing the expenses incurred wholly and exclusively by the appellant was the purpose of this business and in earning the said income; 3. On the facts and in the circumstances of the case and in law, the CIT(A) was not justified in confirming....
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.... account of various expenses, we are of the view that this issue is consequential to the issue involved in Ground No.1 in as much as corresponding income having been held to be chargeable to tax in the hands of the assessee as STCG, the deduction on account of expenses incurred by the assessee on cost of improvement of the assets sold or in connection with the transfer of capital assets only can be allowed. In this regard, the ld. counsel for the assessee has contended that some of the expenses claimed by the assessee are falling in this category. We, therefore, restore this issue to the file of AO with a direction to verify the claim of assessee on this issue and decide the same in accordance with law. Ground No.2 of assessee's appeal is accordingly treated as partly allowed for statistical purposes. 10. As regards the issue involved in Ground Nos.3 and 4, it is observed that although the amount of Rs.25 lakhs on account of security deposits adjusted against the surrender of constructed area /allotted flats to the builder was offered by the assessee as its income in the return of income for assessment year 2005-06, the same was added to its total income by the AO for AY 2004-05 a....
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....lopment agreement and there was no case of making any enhancement on the part of ld. CIT(A) by adopting the higher rate at which other constructed areas was surrendered by the assessee to the developer in the year under consideration. We, therefore, delete the addition made by ld. CIT(A) on this issue by way of enhancement and allow Ground No.5 of the assessee's appeal. 12. Ground No.6 raised by the assessee in its appeal for the assessment year 2005- 06 is not pressed for by the ld. counsel for the assessee at the time of hearing before us. The same is accordingly dismissed as not pressed. I.T.A.No.8090/Mum/2010( AY:2006-07) This appeal is directed against the order of ld. CIT(A)-33, Mumbai dated 17.9.20210. Grounds of appeal raised by the assessee in this appeal read as under : "1. On the facts and in the circumstances of the case and in law, the CIT(A) was not justified in confirming the order of ITO and in treating the business income of the appellant as a short term capital gain; 2. On the facts and in the circumstances of the case and in law, the CIT(A) was not justified in not allowing the expenses incurred wholly and exclusively by the appellant was the purpose o....