TaxTMI 
TaxTMI 
2016 (2) TMI 568
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....aner, Pune. On receipt of this information, the AO issued notice u/s.148 to the assessee. In response to the said notice, the assessee filed a letter stating therein that the return filed on 30-09-2009 be considered as return filed in response to notice u/s.148. 4. During the course of assessment proceedings the AO, on going through the computation of income noted that the assessee has claimed exemption u/s.54F of Rs. 3.25 crores treating the money received of Rs. 3 crores as Long term Capital gain on sale of plot at Baner. He noted that during the survey u/s.133A conducted on 12- 03-2008 in the premises of Shri Kailash Babulal Wani, a copy of the Memorandum of Understanding (MOU) was found which is signed between Fullmoon Housing Pvt. Ltd. and Shri Kailash Babulal Wani. As per the said MOU Rs. 3 crores has to be paid to one Shri Sanjay Nemichand Lohade. 5. During the course of assessment proceedings statement of the assessee Shri Sanjay Nemichand Lohade u/s.131 of the I.T. Act was recorded. The assessee moved an application u/s.144A of the I.T. Act before the Addl.CIT, Ahmednagar Range, Ahmednagar who vide his letter dated 30-12-2011 gave certain directions to the AO. During the....
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....cuted on 16-05-2007 between Fullmoon Housing & Finance Pvt. Ltd. and Shri Kailash Wani. In the said MOU the total price of the property and schedule for payment and names of the party to whom and how much amount to be paid on behalf of Shri Kailash Wani by the proposed purchaser Fullmoon Housing & Finance Pvt. Ltd. was mentioned. In the said MOU it was very specifically mentioned that the total cost was fixed at Rs. 9,26,46,600/- which is inclusive of Rs. 3 crores to be paid to the assessee. Shri Sanjay Nemichand Lohade has released all his rights in the property. Thus, the assessee Shri Sanjay Nemichand Lohade got Rs. 3 crores for relinquishment of all his rights which was shown and disclosed in the return of income under the head "long term capital gain" and it was claimed exempt u/s.54F from the said amount as the said amount was utilized for acquiring the residential house. 7. However, the CIT(A) also was not convinced with the explanation given by the assessee and upheld the action of the AO by observing as under : "6. I have carefully perused the material available on record. The facts of the case are enumerated below : 6.1. Property of 161 R at Survey No. 5/1A admeasuri....
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....Dhorje agreed that hereafter Wani will take carae of the civil suit on behalf of Dhorje. Subsequently since Dhorje could not attend court matters and other meetings regarding sale of land therefore, he gave Power of Attorney to Shri. Sanjay Lohade. This Power of Attorney in favour of Shri. Sanjay Lohade, the appellant was signed on 16.7.2007 and through it the appellant was given all the rights on behalf of Dhorje for executing and performing various acts and deeds and things in respect of entire land i.e. 161 R and civil suit no. 1006/1996. 6.3. On the same day i.e.16/7/2001 Dhorje, Wani and Lohade entered into a Memorandum of Understanding (M.O.U.) Accordingly, Wani granted Development Rights of 40R of plot B to Sanjay Lohade. Further it was negotiated that Lohade will obtain Development Rights for plot A from Kadam family in his name or in the name of his nominee. 6.4 On 16/7/2007 Arvind Jain and Shravan Agarwal on behalf of Fullmoon Housing Pvt. Ltd. entered into M.O.U. with Wani regarding 81R of Plot A. Out of this Kadam family is owner of 40R and regarding 41R Sanjay Lohade was holding Development rights. According to this M.O.U. Fullmoon Housing Pvt. Ltd. paid Rs. 3 crs ....
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....ould therefore, discussed what were the rights conferred on the appellant and whether any of those rights and obligations fell within the definition of Transfer" or not. 7.3. As already stated above, after the expiry of the original owner Shri Vyankatesh Kadam on 4.2.1987 his widow and six daughters became the legal heirs of the 161 ares of property specifically bearing S.Nos. 5/1A (herein referred to as plot A) and 5/1B (herein referred to as Plot B). Kadam family entered into agreement of sale with Pradeepkumar & Co. (represented by Shri Pradeepkumar Dhorje) for the entire property on 1.10.1995, after an initial consent deed executed on 24.8.1995. Shri Dhorje paid Rs. 25 lakhs as earnest money and it was agreed that sale deed for 80 ares (Plot A) would be executed during the month on payment of Rs. 20 lakhs in cash and Rs. 60 lakhs in cheque. However, the Kadam family entered into registered sale deed in respect of Plot A with Wani and Roundal family for a consideration of Rs. 48 lakhs through 8 separate sale deeds bearing document No. 8883 to 8890/95 dated 17.10.1995. Shri Dhorje filed a civil suit against both Kadam and Wani families bearing Civil Suit No.1006/96. Through the....
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....ll the transactions referred to above. g) Shri Dhorje and Shri Wani would have no interest in Plots A and B except the 4 development agreements duly between Wani (and 3 others) with Shri Lohade and his wife in respect of portion of Plot B. 7.6. The appellant has contended that all rights and interest including development rights stand vested in him through the above mentioned MOU. However, as detailed above, the appellant has only to perform certain specific acts as the power of attorney holder of Shri Pradeep Dhorje. The only development rights that he receives as per this MOU is in respect of 40 ares of land in plot B. No rights interest and title can be said to have passed on to the appellant in respect of plot A, transaction pertaining to which is the subject matter of the present appeal. Even noteworthy is the fact that the ownership question of plot A is, as on that date, still disputed in view of the pendency of the civil suit 1006/96. Again, it is highly surprising that no consideration was paid / payable by the appellant Shri Sanjay Lohade either to Shr. Pradeep Dhorje or Shri Kailash Wani. There is no mention in the MOU that any land/ rights in land are gifted to the ....
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.... The receipt of Rs. 3 crores by way of consideration from Fullmoon Housing Pvt. Ltd. therefore, cannot be treated as long term capital gains in the hands of the appellant and has been rightly treated as commission and brokerage by the Assessing Officer. In the result, Grounds No.1 to 11 are dismissed. 8. It may be mentioned here that the appellant has raised the issue of lack of opportunity in connection with the section 144A proceedings. However, it is seen that the application u/s.144A was suo moto filed by the appellant and he was given an opportunity of being heard. Further, once directions are received u/s.144A, this is no ground for the Assessing Officer to separately record his comments on the directions received from his supervisory authority. Hence, I find no merits in Grounds No.4, 8, 10 and 11 on the issue relating to directions passed u/s.144A and lack of opportunity, as claimed by the appellant." 8. Aggrieved with such order of the CIT(A) the assessee is in appeal before us with the following grounds : "On facts and in law, 1 The learned CIT(A) erred in holding that the learned A.O. was justified in taxing the amount of Rs. 3 Crs. received from M/s. Full Moon Ho....
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....3 Crs. was rightly offered to tax as capital gain. 6 The learned CIT(A) erred in not appreciating the correct facts of the case and hence, the addition sustained may kindly be deleted. 7 The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal. 9. The assessee has also raised an additional ground which reads as under : "The appellant submits that the amount of Rs. 3 crores received should be considered as damages and hence, the said amount should be treated as exempt from tax." 10. The Ld. Counsel for the assessee submitted that the additional ground raised is legal in nature and all the facts are on record. Therefore, the same may be admitted for adjudication. Relying on various decisions he submitted that since no new facts are required to be investigated and the additional ground is legal one the same should be admitted. For the above proposition he relied on the following decisions : 1) NTPC Ltd. 222 ITR 383 (SC) 2) Jute Corporation of India Ltd. 187 ITR 688 3) Ahmedabad Electricity Co. 199 ITR 351 (Bombay) 11. After hearing both the sides, the additional ground raised by the assessee being a legal one is admitted for adjudicat....
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....sessee submitted that brokerage or commission is to be paid for the services rendered in connection with the sale transaction. In this case for the sale of land to Fullmoon Housing & Finance Pvt. Ltd. the AO or the CIT(A) have not proved the nature of services, if any, rendered by the assessee. Secondly, the brokerage or commission in connection with the land deal is generally to the extent of 2 to 3%. However, in the instant case the assessee has been paid Rs. 3 crores out of the total consideration of Rs. 9 crores by the developer which is almost 33% of the total consideration. Hence, such a big amount is unlikely to be brokerage or commission. Thirdly, the agreement clearly states that the amount is being paid to the assessee for surrendering his rights in the land. The AO and the CIT(A) interpreted the payment as brokerage or commission which is not justified. 16. Referring to the decision of the Hon'ble Supreme Court in the case of CIT Vs. Khetan and Company reported in 45 ITR 170 and the decision in the case of CIT Vs. Delhi Flour Mills Co. Ltd. reported in 35 ITR 15 he submitted that the department cannot rewrite an agreement. 17. Referring to the decision of Hon'ble Bomba....
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....nce found during the course of survey or thereafter that the assessee is a broker or mediator. 21. So far as the additional ground is concerned the Ld. Counsel for the assessee submitted that the compensation received by the assesses constitutes damage for breach of agreement in his hands and therefore the same is not at all taxable in his hands. For the above proposition, the Ld. Counsel for the assessee relied on the following decisions : i. CIT Vs. J. Dalmia reported in 149 ITR 215 (Delhi) ii. Baroda Cement and Chemicals Ltd. Vs. CIT reported in 158 ITR 636 (Gujarat) iii. CIT Vs. Abbasbhoy A. Dehgamwalla & others reported in 195 ITR 28) 22. Without prejudice to the above, the Ld. Counsel for the assessee submitted that if the receipt has resulted into long term capital gain then the deduction u/s.54F should be granted. He submitted that although the assessee in his computation has claimed such deduction u/s.54F, however, the lower authorities have not adjudicated the issue. He accordingly submitted that the ground raised by the assessee should be allowed. 23. The Ld. Departmental Representative on the other hand heavily relied on the order of the AO and the CIT(A). So f....
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....nducted in the premises of Shri Kailash Babulal Wani during which an MOU dated 16-05-2007 was impounded. As per the said MOU land admeasuring 41 Ares is to be purchased by Fullmoon Housing Pvt. Ltd. for total consideration of Rs. 9,26,46,600/- from Shri Kailash Babulal Wani. The bifurcation of payment of Rs. 9,26,46,600/- is as under: 1. Rs.3,40,00,000/- To Kadam sisters (Original owners) 2. Rs.25,00,000/- For expenses such as stamp duty etc. 3. Rs.50,00,000/- To Shri Kailash B. Wani (as mobadla) 4. Rs.3,00,00,000/- To shri Sanjay Nemichand Lohade (For surrendering rights) 5. Rs.2,11,46,600/- To be paid to the assessee in cash TOTAL Rs.9,26,46,600/- 27. The assessee in his computation considered the same amount as long term capital gain and claimed exemption u/s.54F. We find the AO rejecting the contention of the assessee that the same is a capital gain treated the same as brokerage or commission which has been upheld by the CIT(A). It is the contention of the Ld. Counsel for the assessee that since the amount was received for surrender of the rights in the property the same is long term capital gain. Therefore, the deduction u/s.54F should be allo....
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....ayment of Rs. 9,26,46,600/- is as under : 1. Rs.3,40,00,000/- To Kadam sisters (Original owners) 2. Rs.25,00,000/- For expenses such as stamp duty etc. 3. Rs.50,00,000/- To Shri Kailash B. Wani (as mobadla) 4. Rs.3,00,00,000/- To shri Sanjay Nemichand Lohade (Forsurrendering rights) 5. Rs.2,11,46,600/- To be paid to the assessee in cash TOTAL Rs.9,26,46,600/- The amount of Rs. 2,11,46,600/- which was received by the assessee in cash was offered as additional income in the statement of the assessee recorded during the course of survey. So far as the other 4 items are concerned the AO accepted the items 1, 2 and 3 above as genuine while he doubted the amount of Rs. 3 crores paid to Mr. Sanjay Nemichand Lohade for surrendering his rights. While doing so, The AO was of the opinion that the amount of Rs. 3 crores was paid to Shri Lohade at the behest of the assessee and in fact this money belongs to the assessee. Further according to the AO Mr. Sanjay Nemichand Lohade did not enjoy or had any right in the property transacted which was eventually sold to M/s. Full Moon Housing Pvt. Ltd. According to the AO in the transfer of land the role of Mr. Sanjay ....
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..... Kailash Babulal Wani : "9. Similarly, further negotiation took place between the Party No.2 of the one part, the Party No.3 of the second part and said Kadam of the third part and accordingly, the Party No.3 decided to obtain development rights and/or purchase the said Plot-A from said Kadam, either in his name or in the names of his nominees, at the sole discretion of the Party No.3". 13.4 We further find that Mr. Arvind Jain, Director of M/s. Full Moon Housing Pvt. Ltd. in his statement recorded u/s.131 on oath on 29-11- 2010 in his reply to Question No.25 recorded u/s.131 on oath on 29-11- 2010 has answered as under : "Q.25 I hope that with the break you may have remembered the facts. You are given a further opportunity to state the details about the discussions with Shri Lohade? Ans. Sri Lohade was expecting an amount of Rs. 4 crores and we were ready for a payment upto Rs. 3 crores." 13.5 Similarly, we find Mr. Sanjay N. Lohade in his reply to Question Nos. 16, 17, 22, 23, 24 and 25 has replied as under : "Q.16 Give details of Spl.Civil Suit No.1006/1996 before the Civil Judge, Sr. Division, Pune? Ans. This case was filed by Shri Pradeep Dorje against Mrs. Kadam ....
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....that the purchaser M/s. Full Moon Housing Pvt. Ltd. after evaluating the interest in the land of Mr. Sanjay N. Lohade and after negotiating for the amount paid the amount of Rs. 3 crores on their behalf and not on behalf of the assessee. It was the purchase who itself decided the terms of payment including the amount to be paid to Kadam Family, Mr. Sanjay N. Lohade and to the respondent and therefore the AO's observation that the said purchaser made the payment to Mr. Sanjay N. Lohade at the behest of the respondent, in our opinion, is incorrect. Further, in view of the above facts, the observation of the AO that Mr. Sanjay N. Lohade had no locus standi is also incorrect since Mr. Sanjay N. Lohade was given not only Power of Attorney but was also given the right to obtain the development agreement and purchase the said land in his name and for that purpose the entire litigation involved in Civil Suit No.1006/1996 was also required to be attended by him at his own cost and responsibility. 13.7 In case of transactions in immovable properties the purchaser will always try to buy the property free of litigation. When the land in question is not free from litigation and a civil suit i....
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....mercial expediency. No abstract or pedantic view can be taken in the matter. In the instant case, the assessee is engaged in the business of trading in land and property development. No buyer will buy any property when the property in question is disputed. It is also the responsibility of the seller to sell the property free of litigation from any encumbrance. Therefore, even if the amount of Rs. 3 crores would have been paid by the assessee to Mr. Sanjay N. Lohade for giving free and peaceful possession of the land to M/s. Full Moon Housing Pvt. Ltd. the said amount would have been allowed as deduction from the hands of Shri Kailash Babulal Wani, i.e. the assessee. Therefore, in our opinion, it is immaterial as to whether the amount has been paid to Mr. Sanjay N. Lohade by M/s. Full Moon Housing Pvt. Ltd. at the instance of the assessee or the assessee has paid directly to Mr. Sanjay N. Lohade from the total consideration. As mentioned earlier in the preceding paragraphs, the MOU was impounded, therefore, the contents of the MOU has to be considered and accepted as a whole. The revenue cannot be permitted to use a part of the MOU as correct and the other part as incorrect. Since t....