TaxTMI 
TaxTMI 
TaxTMI 
2016 (3) TMI 417
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....of Rs. 10.94 crores had been paid by demand drafts in the immediately preceding year i.e. Assessment Year 2008-09 and therefore addition sustained by adopting the cost of land at Rs. 4,20,27,377/- instead of Rs. 10,94,10,9107- was without jurisdiction. 1.2 That the learned Commissioner of Income Tax (Appeals) has further failed to appreciate the factual and legal position that once an expenditure had been incurred, the same necessarily had to be adopted as part of cost of land of the appellant company and allowed as necessary deduction while computing the profit on sale of commercial block by the appellant company. 1.3 That the learned Commissioner of Income Tax (Appeals) has also failed to appreciate that Memorandum of Understanding dated 1.04.2007 specifically provided that cost incurred by transferor companies towards licence fee development charges and, conversion charges shall be paid by the company on purchase of land and as such, there was neither law and nor on fact to conclude that, such expenditure was not an expenditure incurred by the appellant company and allowable as deduction as cost of land. 1.4 That the approach adopted by the learned Commissioner of Income Ta....
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.... on 21.03.2011 declaring a loss of Rs. 2,86,91,730/- and assessment u/s 143(3) was completed on 30th December 2011 by making two adjustments i.e. (1) disallowance of Rs. 6,73,76,070/- being difference between the cost adopted by the assessee and determined by the AO to be deducted from sale of land and (2) disallowance of an amount of Rs. 1753 lacs being expenditure as deduction on land because it is found to have been incurred prior to the date of the sale deed. Against both the additions the assessee in appeal before learned Commissioner of Income-tax (Appeals), who in turn confirmed the disallowances and therefore the assessee is in appeal before us. 3. The first ground of appeal is against the disallowance of sum of Rs. 6,73,76,070/- being expenditure incurred by the assessee on license fees, the external development charges and conversion charges of land as according to AO they cannot be forming part of cost of land for computing the profit on sale of commercial complex by the appellant company. The brief facts of this grounds is that during the year the assessee company sold a commercial property at Block B, Gurgaon vide conveyance deed dated 06.03.2009 for Rs. 7,72,04,000/-....
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....The total expenses incurred for the construction is Rs. 75.50 crores. This cost was bifurcated by the assessee having been incurred in two year i.e. Assessment Year 2008-09 and 2009-10 for Block A of Rs. 54.04 crores and for Block B Rs. 21.46 cores. As during FY 2008-09 i.e. AY 2009-10, Block A was sold for Rs. 61.76 acres against this the assessee deducted cost of land of Rs. 10.94 based on the total built up area and cost of building of Rs. 54.04 crores and thereby showing a profit of Rs. 3.22 crores. The ld AO did not consider license fees, conversion charges and external development charges of Rs. 13.76 while calculating the cost of land as these expenditure was incurred by the vendor prior to the purchase of land by the appellant company. On appeal before CIT (A) he confirmed the disallowance as under :- "4.4 Ground No.2 to 2.2 have been taken disallowance of Rs. 6,73,76,070/- about which AO has mentioned in the body of order that there is difference of Rs. 6,73,76,070/- between cost adopted by assessee which is Rs. 10,94,10,910/- and as per AO it is Rs. 4,20,27,377/-. In this regard, Ld.AR of the appellant has submitted that the figure taken by the AO is totally misconceived....
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....efore us wherein the opening balance of capital work in progress was stated to be Rs. 22,70,96,065/- and closing balance was stated Rs. 21,46,28,942/- and therefore he submitted that cost of land taken by the assessee should be granted as deduction. 5. The ld DR vehemently supported the order of AO as well as learned Commissioner of Income-tax (Appeals). 6. We have carefully considered the rival contention and facts placed before us. It is important to look at MOU entered between (1) Unitech business parks ltd, (2) unitech developers and hotels Pvt. Ltd and (3) Unitech Hospitality service ltd. According to this agreement it is stated that united business park ltd is the owner of the licensed land which was purchased by it from Unitech Ltd on 31-August-2004. On 30.3.2006 Unitech business park ltd further entered into the agreement to sale this property to Unitech Developers and Hotels Pvt. Ltd for Rs. 675 lacs only. As unitech developers and hotels Pvt ltd could not be pay the price agreed to unitech business park ltd, Unitech Developers and hotel Pvt ltd and the assessee jointly approached the Unitech business parks ltd for cancellation of agreement to sale dated 30th March 2006 ....
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....d paid by the Vendee." 7. According to paragraph No.5 of that sale deed of tax levies assessment demand or charges which are levied in respect of the said plot of land paid up to the date of Sale deed are to be paid by the vendor and after that by the assessee. Contrary to the statement made by the assessee according to the sale deed in Para No.1 of the sale deed total interest in the land were transferred by Unitech business Parks Ltd to the assessee for Rs. 7.16 only. We failed to understand that if such cost is to be borne by the assessee why it does not find a mention in the sale deed or MOU executed by the parties. Further AO and CIT (A) both have perused these documents and based on that have disallowed these cost to the assessee. Therefore in our opinion merely because the assessee has recorded the cost of external development charges and license fees in the books of account by crediting it to some other parties account and showing it as work in progress i.e. opening stock , it cannot be granted as deduction from the sales price of the land when ( 1) the cost has been incurred by the other party, (2) the sales deed proves otherwise, ( 3) MOU relied up on by the assessee doe....
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....uilding between the 28th March 2008 to 31St March 2008 i.e. within four days this amount of expenditure is incurred. On reply filed by the assessee explaining the expenditure incurred during this period of Rs. 17.53 lacs it was also observed by AO that all these expenses are incurred prior to the purchase of the land by the assessee. The AO further supported his disallowance relying on the sale deed executed on 28th March 2008 wherein on the 3rd Para it is clearly stated that vacant plot of land has been sold to the assessee alternatively it was stated by AO that sale to the assessee was in respect of land only therefore there is no construction on that land till the date of sale of land. Against this the assessee preferred an appeal before the learned Commissioner of Income-tax (Appeals) wherein detailed arguments were made. However learned Commissioner of Income-tax (Appeals) confirmed this disallowance holding that the above expenditure has been incurred prior to the registration of sale deed and rejected the argument of the assessee that expenditure was incurred in pursuance of memorandum of understanding dated 01.04.2007. He further confirmed the finding of the AO that the lan....