TaxTMI 
TaxTMI 
1998 (8) TMI 625
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....Plot No. 1087 CST No. 1051 Mulund (W) Bombay to Marathon Combine price 71,79,720 Less : Cost of plot purchased as per valuation report of Mr. Namavati Roshan attached 11,83,159 Legal fees payable : M/s Soloman & Co. 1,00,000 H.P. Ranina 6,750 Mr. Namavati 1,500 D.M. Harish 4,000 M.R. Deshpande 10,000 M.K.S. Chave 500 Other legal provision 35,000 1,57,750 Paid to compound wall 16,750 Demolition of office shatter & temporary office construction (as per statement) 47,775 Security salary & other expenses (as per statement) 60,000 14,65,434 Long-term capital gain 57,14,286" 3. The assessee entered into an agreement dated 26-6-1992 to sell all the development rights in respect of the above-mentioned plot to one M/s. Marathon Combines and to appreciate the issues raised in this appeal it is necessary to look into some of the terms of this agreement. In the agreement, the appellant is described as the owner and M/s. M....
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....ime as the essence in this respect by giving 15 days' notice in writing to the Developers on expiry of such 6 months. ii. Rs. 56, 62,500 (Rupees Fifty Six lacs sixty two thousand five hundred only) within 9 months from the date of execution of this Agreement. The Owners shall be entitled to make time as the essence in this respect by giving 15 days' notice in writing to the Developers on expiry of such 9 months and the balance of; iii. Rs. 11,32,500 (Rupees Eleven lacs thirty two thousand five hundred only) before delivery of charge of the said Property to the Developers or on or before 31st March, 1993 whichever is earlier. The owners shall be entitled to make time as the essence in this respect by giving 15 days' notice in writing to the Developers on expiry of such period. 7. Upon payment of the full consideration by the Developers to the owners as provided in this Agreement the owners shall grant a licence to the Developers to enter upon the said Property with rights: a. To put up and/or erect sign boards upon the said property as also issue advertisements including the advertisements in newspapers as may be deemed fit by the Developers in re....
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.... 16. The owners shall at the option of the Developers handover possession of the said property to the Developers at any time before execution of the conveyance after full payment of the consideration and against execution of the supplementary agreement providing for possession on which the appropriate stamp duty payable in that case shall be paid by the Developers. 17. ** ** ** 18. ** ** ** 19. ** ** ** 20. Within 12 months of the completion of construction of new building on the said property as provided herein the developers shall form a Co-operative Housing Society of holding of premises therein and on completion of registration of such Co-operative Housing Society the owner shall executate a conveyance on the said property alongwith buildings thereon in favour of such Co-operative Housing Society and the developers shall join in the execution of the conveyance as confirming party thereto. All the costs charges and expenses of the formation and registration of such Co-operative Housing Society shall be borne and paid by the developers only and the owner shall not in any way be responsible or liable for the same." 4. The area of the plo....
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.... valuer and the approved valuer, Dr. Roshan H. Namavate, determined the value of the plot as on 1-4-1981 at Rs. 11.83 lakhs after taking into account the cost inflation index multiplier of 2.23. As the capital gains were returned in three different assessment years, the cost of the plot for the purpose of working out the capital gains was also taken proportionately in the respective years. The Assessing Officer held that the sale consideration should be taken at the figure of Rs. 1,13,25,000 stipulated in clause (1) of the agreement. He was of the view that there cannot be a transfer in stages or in different years and as per the above agreement, the entire plot No. 1087 of 1,672 sq. mtrs. had been transferred. He also mentioned that the assessee obtained the necessary 'No Objection Certificate' under section 269UL(3) of the I.T. Act from the Appropriate Authority and such a certificate is issued on the basis of the representation made before the Authority by the appellant that the entire plot was sought to be transferred. He was of the view that, if the assessee sought to transfer the plot in different stages, it was incumbent upon it to approach the Appropriate Authority repea....
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....t pages 87 to 89 in which it was submitted as follows: "Society entered into Agreement for Development dated 26-6-1992 for FSI to be consumed by Developer, M/s. Marathon Combines for Plot area of 1,672 sq. mtrs. The said Plot No. 1087 is an amalgamated plot with Plot No. 1088, and thus total plot area of both the plots in BMC records is 3,154.60 sq. mtrs., out of which internal road (access) area is 75 sq. mtrs. and Recreation Garden area is 473.19 sq. mtrs. (for both these items FSI is not permitted to be consumed as per BMC rules) and hence net area for consumption available remains 2,606.14 sq. mtrs. and out of which on plot No. 1088, the consumed FSI (for Anupama & Anurag, existing buildings built in 1974) is 1,342.25 sq. mtrs., and hence net available FSI permitted by BMC to develop on plot No. 1087 remains only 1,253 sq. mtrs., for which developer has paid to Society on different dates as follows: 1. Rs. 11,32,500 30-06-1992 For FSI of 1,060 sq. mtrs. Rs. 13-11-1992 2. Rs. 6,02,825 24-09-1993 For FSI of 89 sq.mtrs. Rs. - Interest @ 15% per annum 3. Rs. 20-09-1994 For FSI of 104 sq. mtrs.....
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.... on the other hand supported the stand of the Assessing Officer and pleaded that the approval of the Appropriate Authority was obtained on the representation that the consideration was Rs. 1,13,25,000 and so there was no justification at all for not working out the capital gains on the basis of this consideration. It is also pleaded that there is only one agreement in respect of the transfer of the development rights and there cannot be repeated transfers of the same development rights. As the capital gains have to be levied in the year of the transfer, it is pleaded that the action of the Assessing Officer in bringing the entire amount to tax in one year is valid in law. 9. We are of the view that the assessee deserves to succeed. Firstly, the sale consideration cannot be taken at Rs. 1,13,25,000 for the simple reason that this amount was never received. The terms of the agreement make it very clear that this amount was only a hypothetical figure and as per clause 10 of the agreement it is evident that the assessee would be entitled only for a reduced consideration if the FSI obtained is less than 1,672 sq. mtrs. So clearly, the assessee cannot be taxed on an amount that was no....
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....e clear that after payment of Rs. 71,79,720 being the full consideration, our clients will be entitled to all the rights of an absolute owner to the portion admeasuring 1,060 sq. mtrs. of the above plot including right available on account of relaxation of building regulations or otherwise." This letter may be seen at pages 52 and 53 of the appellant's paper book. In the letter dated 13-11-1992 addressed by the appellant to M/s. Marathon Combines and which may be seen at page 54 of the applicant's paper book, it is made clear that the former have granted a licence to enter upon and charge of a portion admeasuring 1,060 sq. mtrs. The relevant portion of the letter dated 16-12-1993 addressed by the appellant to M/s. Marathon Combines which may be seen at pages 59 to 62 of the appellant's paper book reads as under: "Your two letters, both dated 24th September, 1993 as also your letter dated 2nd December, 1993 were considered at the Special General Body Meeting of our members held on 5th December, 1993, when your Shri Ramnikbhai Z. Shah was also present. At our aforesaid Special General Body Meeting, your offer for payment of Rs. 6,48,037 for utilisation of additional 89 sq....
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.... 11. The above correspondence corroborates the clarification of the assessee contained in its letter dated 5-10-1995 addressed to the Assessing Officer which we have extracted hereinbefore. In other words, there is no dispute that the FSI of 1,253 sq. mtrs. was obtained in stages and that possession of 1,253 sq. mtrs. was given in stages and that possession of 419 sq. mtrs. was not handed over to the developer and that the consideration was also received on different dates falling in different accounting years. 12. Actually, the assessee had all along claimed that only a licence to enter and carry on construction was granted to the developer and the possession of the plot was not allowed. However, the question whether such granting of licence amounts to granting possession or even if it does not amount to granting possession, whether it, under specified circumstances, amounts to transfer in terms of section 2(47)(v) of the I.T. Act need not detain us here as the assessee himself had offered capital gains on the basis of the area in respect of which the developer was allowed the licence to enter and carry on construction and it appears to us that such an offer could have been ma....