TaxTMI 
TaxTMI 
2015 (9) TMI 953
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.... result of transfer of land to M/s Romell Developers the 'nature' of capital asset changed from land to builtup area since there was no such activity or intention on the part of the appellant, to carry out the business of construction. 3. BECAUSE. ld. CIT(A) erred in law and on facts in upholding the decision of the ld. AO that the sale of built up area received from M/s Romell Developers has resulted in 'Business Income' and not 'Long Term Capital Gain' thereby disallowing the claim for indexation and beneficial rate of tax. The appellant craves leave to add. alter. amend. modify. delete or withdraw any of the ground." ITA No.8712/Mum/2010 "The appellant individual is aggrieved by the order passed by ld. CIT(A)-VI, Mumbai u/s 143(3) r.w.s.147 and 143(3) of the Income- tax Act, 1961 and is in appeal: 1. BECAUSE, ld. CIT(A) erred in law and on facts in upholding the decision of the ld. AO that the sale of built up area received from M/s Romell Developers has resulted in 'Business Income' and not 'Long Term Capital Gain' thereby disallowing the claim for indexation and beneficial rate of tax. 2. BECAUSE, ld. CIT(A) erred in law and ....
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....t an MOU was signed between them and Rommel Property Pvt. Ltd. (RPPL),that an amount of Rs. 25lacs was to be paid to each of the owners for transfer of development rights, that vide agreement dated 28.8.2001 between the owners and RPPL it was decided that the owner would surrender 55% of the property, that the developer would hand over 45% of the constructed area to the owners, that they would in turn divide the constructed area in equal shares,it was also decided that Rs. 50 lacs was to be taken as share for transfer of development rights. The AO was of the opinion that capital gain amounting to Rs. 25 lacs had accrued to the assessee for transfer of development rights in the previous year relating to AY 2002-03, that he had not offered the above amount for taxation for that year, that he had subsequently offered the income as capital gain in the AY 2005-06, that entire transaction of sale of property was not declared by the assessee in the original return of income, that subsequent to the survey action it filed revised return and had declared above transaction for AY 2005-06. He directed the assessee to explain as to why capital gain should not be calculated in the previous year....
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....d 2003-04, that in the AY 2002-03 he had taxed cash transaction of Rs. 25.00 lacs as business receipts which was incidentally received over two assessment years i.e. 2001-02 and 2002-03, that he had taxed the built up area as capital gains that was received by the assessee in 2003-04,that in 2005-06 the AO once again brought to tax it as business income, that said transaction was part of disputed transaction,that the three limbs of same trasaction were taxed in three different AY.s. under two different heads of income, that Vakola land was to be treated as capital asset, that income arising on its transfer to be treated as business gain.He directed the AO to suitably modify the order. He further held that the develo -pment agreement as entered into on 28.01.2001 achieved certainty and finality in pursuance of conciliation deed dated 05.04.2004, that it was finally executed during AY 2005-06,that the amount of Rs. 25.00 lacs should not be brought to tax on a standalone basis in that year. 4.During the course of hearing before us Authorised Representative (AR) contended that there was no conversion of capital assets to business assets,that the assessee had got only 9 flats, that he ....
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....he FAA disallowed theclaim for indexation and beneficial rate to the assessee with regard to the transaction in question,that he held that income was to be taxed in the AY.2005-06. As far as year of taxability is concerned,we are of the opinion that the FAA had rightly held that income was to be assessed in the AY.2005-06,as there was no basis for taxing it in earlier assessments.The FAA has given a categorical finding of fact that the flats were not complete in the earlier AY.s.and that same were received by the assessee in the AY.2005-06 only.We do not find any legal infirmity in his order.But,we are of the opinion that the AO and the FAA had wrongly held that the assessee was carrying out business activities.The built up area received by the assessee from the developer should not have been treated as stock in trade.The compensation received by the assessee in cash or in form of flats was part of the compensation for transfer of the plot of land.In short,the basic ingredients of business were missing in the transaction before us. Here,we would like to refer to the case of Vasavi Pratap Chand(supra).In that matter a property comprising of a house and an open land around it total....
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....n to the seller and cost of acquisition to the buyer are two sides of the same coin. Both the parties to the agreement knew as to what was being transferred and what was being received. In the case of exchange, the price of both the assets would be the same. So, when the assessees had agreed to transfer 44 per cent of land, it must have kept in mind the value of construction of 56 per cent of built up area. Therefore, we are of the considered opinion that consideration for the transfer of 44 per cent land was the cost of construction of 56 per cent built up area which was to be incurred by the builder. This very sum would also amount to investment by assessee in the construction of flats and, therefore, the cost of construction of the flats by the builder would also amount to the cost of acquisition of the flats by assessees. 10.In view of the above discussion, it is clear that in the year under consideration, there was transfer of not only the flats as superstructure but also the proportionate land inasmuch as 56 per cent of the land was retained by the assessee under the collaboration agreement. So we are in agreement with the alternate contention of the assessee's counsel ....
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....building without charging any amount from the assessee n lieu of that the developer got right to sell 50% of the constructed area in the said building. The construction was accordingly made and out of his share of constructed area the assessee sold two flats.He declared the income on such sale under the head 'LTCG'. However ,he AO treated the same as business income observing that the developer had not paid any amount for land and that the assessee got his premises constructed without paying any money to the builder,that there was no transfer of land,that the assessee was carrying out business activities.On appeal,the FAA held that the income derived by the sale of flat was capital gain,that the cost of construction in the hands of the assessee was the amount for which he had transferred the TDR rights.He also allowed the benefit of indexation at the cost of acquisition proportionately of land.Deciding the appeal filed by the AO,the Tribunal held that the assessee had not sold any part of the property except the above mentioned two flats, that he had rented out his share of property to have constant rental income,that the income earned by the assessee was capital gains and not inco....