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2014 (9) TMI 129
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....he prayer of the assessee in these grounds of appeal is only for consequential relief. We are of the view that the AO, while giving effect to the order of the Tribunal, will give consequential relief in the matter of charging of interest u/s. 234A & 234B of the Act. 4. Ground No. 4 raised by the assessee in ITA No.149/14 and ground No.4 raised by the assessee in ITA No.150/14 read as follows:- A.Y. 2007-08 "4. The CIT(A) erred in confirming the addition of Rs. 9,49,677/- without appreciating the fact that the consideration received on sale of TDR rights is not taxable under the provisions of the Income Tax Act and the CIT(A) further erred in not appreciating the decisions relied on by the appellant." A.Y. 2009-10 "4. The CIT(A) erred in confirming the addition of Rs. 1,09,00,785/- without appreciating the fact that the consideration received on sale of TDR rights is not taxable under the provisions of the Income Tax Act and the CIT(A) further erred in not appreciating the decisions relied on by the appellant." 5. The aforesaid grounds of appeal arise under identical facts and circumstances and therefore can be dealt with together. The assessee is a company engaged in....
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....ved consideration amounting to Rs. 22,50,000/-. The rights are acquired by virtue of provisions of Section 14-B of Karnataka Town & Country Planning Act, 1961 and rules therein relating to granting Transferrable Development Rights to the owner's of the land against compulsory acquisition of land. Until the point of time these development regulation came into existence, the assessee did not have right to receive and apply the transferable development rights. It is these rights on the assignment of which the assessee has received the impugned amount. Hence, under the provisions of Income tax act, 1961 the said consideration is not chargeable to tax under the head Capital Gains. To substantiate the above points, we rely on the following judgments. 1. Jethalal D. Mehta Vs. Deputy Commissioner of Income- tax (2005) 002 SOT 0422 (MUM.) 2. CIT vs. B.C. Srinivas Setty 128 ITR 204 (SC) 3. Syndicate Bank Ltd. v. Addl. CIT (1985) 155 ITR 681 (Kar.) 4. Syndicate Bank Ltd. Vs. Addl. CIT (1985) 155 ITR 681 (Kar.) 5. B.G. Shah vs. CIT (1986) 162 6. CIT vs. H.H. Maharaja Sahib Shri Lokendra Singhal (1986) 162 ITR 93 (M.P.) 7. CIT vs. Kark 165 ITR 336 (A.P.) 8. Rajabali ....
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....capital gain and since the computation of capital gains is not possible, there could be no charge to tax on capital gains on sale of TDRs. 8. Aggrieved by the action of the AO, the assessee preferred appeal before the CIT(Appeals). The CIT(A) confirmed the action of the AO for the following reasons:- "The facts which emerge are :- (i) The asset in question was acquired by the appellant and utilized for business purpose. (ii) The appellant had entered into a business transaction (joint Development Agreement with M/s Sobha Developers in respect of the said property). (iii) The appellants lands were compulsorily acquired by the local authorities (BBMP) for which the appellant has been awarded TDRs. (iv) The said asset i.e. TDR rights have been valued by the appellant in its books of account (v) The cost of TDR is the market value of the land as on date of exchange. Since the market value of the land exchanged for TDR remained the same as it existed at the time of its purchase, the cost of TDR is the same as that of the cost of land acquired by BBMP. (vi) The appellant itself has declared income from sale of part of the land acquired as business income in A.Y. 2....
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....e two appeals is ground No.5 & 6 raised by the assessee in ITA No.149/Bang/2014. These grounds read as follows:- "5. The CIT(A) erred in confirming the addition of Rs. 4,00,00,000/- as reimbursement of interest free refundable deposit payable under the principal lease deed. 6. The CIT(A) erred in confirming the addition of Rs. 34,85,870/- on the ground that the appellant has not furnished any details." 12. The facts regarding the aforesaid ground are as follows. The assessee in the course of its business entered into a lease agreement with RBBPANM Public Charities ("Charities" for short) on 22.8.2005, whereby the assessee took on lease for a period of 63 years from 22.8.2005 a vacant site known as Annaswamy Mudaliar Place belonging to Charities, measuring about 78,249 sq.ft. at St. Marks Road, Bangalore. Under the lease agreement, the assessee paid a sum of Rs. 4 crores as interest free refundable deposit and another sum of Rs. 6 crores as non-refundable deposit to the Charities. 13. On 30.12.2006, the assessee sub-let the aforesaid property to M/s. Sobha Developers Ltd. for the remaining tenure of the lease from 30.12.2006. On 27.1.2007, a supplementary lease agreement....
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.... the break up of expenses of Rs. 10,86,78,729 given by the assessee which was as follows:- (a) Eviction Charges The assessee had furnished the following break up of cost of the lease debited to its P & L Account amounting to Rs. 10,86,78,728/-, vide its letter dated 03.01.2013. Sl No Particulars Amount (Rs). 1 Lease Non Refundable 6,00,00,000 2 Stamp Duty 2,60,23,000 3 Registration and other fee 57,17,682 4 Eviction charges paid to tenants of RBBPANM 1,33,00,000 5 License Fee & other Expenses 10,52,176 6 Feasibility Study Expenses & other related expenses 25,86,670 Total 10,86,78,728 17. The AO on an analysis of expenditure as aforesaid, came to the conclusion that a sum of Rs. 34,85,870 out of the expenditure of Rs. 10,86,78,728 had not been proved by the assessee to have been incurred by it in connection with the lease. Accordingly, the AO computed the income from transaction of sub-lease as follows:- "Cost of lease as per assessee's working Rs. 10,86,78,728 Less: Exclusion from cost of lease as discussed above Rs. 34,85,870 Revised cost of lease Rs. 10,51,92,858" As ....
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....ion of the Schedule Property from the tenants/un-authorised occupants therein; d) Rs. 19,17,70,000/- (Rupees Nineteen Crores Seventeen Lakhs Seventy Thousand Only) towards interest free refundable deposit in terms of this agreement;" 21. A perusal of the aforesaid clause would clearly show that a sum of Rs. 4 crores is given as reimbursement and there is nothing on record to show that this sum was refundable by the assessee to Sobha Developers. It is rightly treated as income of the assessee by the revenue authorities. 22. The ld. counsel for the assessee, however, sought to rely on a letter dated 4.8.2007 by Sobha Developers to the assessee whereby they have confirmed as follows:- "Dear Sir, Sub: Balance Confirmation as on 31-03-2007 With reference to the above subject, we have paid an amount of Rs. 56,28,70,000 (Rupees Fifty six crores twenty eight lakhs seventy thousand only) as on 31st March 2007 towards refundable deposit and advance towards the property as given below: Sl No. Property Amount 1 Minerva Mills Property 24,60,00,000 2 St Mark's Property 31,68,70,000 "23. It is not clear from the aforesaid letter....
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....ct of the further payments made to the non-resident, the assessee had filed certificate of CA obtained at the time of making remittances to the non- resident and this should be sufficient to show that the assessee actually incurred the expenses. The non-resident was engaged for architectural study and the payment was architectural fee. Based on the certificate of the CA obtained at the time of making remittances to the non-resident and the other surrounding circumstances, it was submitted that the revenue authorities ought to have allowed the claim of the assessee for deduction. 28. The ld. DR relied on the order of the revenue authorities. 29. We have given a careful consideration to the rival submissions. It is not in dispute that the non-resident was an architect and engaged by the assessee for the purpose of carrying out the architectural study for development of the property obtained on lease. A payment equivalent to US $ 10,000 was allowed by the AO as there was a supporting invoice from the non-resident. A perusal of the said invoice, a copy of which is placed at page 44 of the assessee's paperbook shows that payment to the non- resident is the first instalment for....