2017 (1) TMI 933

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....me from the project, that it had purchased a plot of land admeasuring 37,430 Sq.mts., that out of the said an area of 5398.90 Sq.mts. was reserve land, that no construction activity could be carried out on the said portion of the plot, that it completed the construction work in the remaining area of the plot of land and sold the same, that it offered the profit for taxation in the respective years of completion of the project,that it had capitalised the cost of reserve land of 5398.90 Sq.mts. in the completed project, that after completion of project it approached the government of Maharashtra for de-reservation of the plot of 5398.90 Sq.mts.,that vide its notification dated 03/12/2003 the government de-reserved the said plot subject to the condition that 40% of the plot of land should be utilised for construction of Police quarters, Police station etc., free of cost to the government, that the assessee entered into an agreement, dated 30/06/2008, with the Police department for development of the plot of 5398.90 Sq.mts.,that as per the said agreement the assessee was required to constructed Police-quarters and Police station on 2159.56 Sq.mts.,that as per the agreement it agreed to....

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....ters and station was for gaining the possession of the balance plot, that the cost of plot of land of 3239.34 Sq.mts. had to be taken as profit of the assessee from the said project, that the assessee had not carried out any construction activity in the balance 60% of the plot, that it had become owner of the balance plot on completion of certain contractual liabilities, that assessee got the title only after the plot was declared de-reserved by the government of Maharashtra,that the assessee was not correct in stating that it had constructed the project on no profit no loss basis,that it had incurred expenditure of 4.59 crores for construction of the quarters and station,that the cost of the plot of 3239.34 Sq.mts.was the consideration received for completing the quarters and station,that expenditure incurred on Police quarters and station was to be reduced from the value of the plot as on that date and balance was to be offered as income for the said transaction.He worked out the profit from the transaction in question on the basis of Stamp Duty Valuation as per the Ready Reckoner. The working of the AO read as under: Area of plot received by the assessee on completion of the po....

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....f cost for the Police department, that it earned the benefit of developing the remaining 60% of the property owned by it,that after parting with 40% of the reserve land and constricting the building free of cost for the Police department the assessee gained the benefit of the developing the 60% of the land, that by its act the assessee only improved upon the right of the land owned by it, that no income had accrued to it at that stage,that same would accrue to it only after it had developed the property/sold the property,that it had parted with 40% of the land and expenses were incurred for improving upon its rights to develop the balance 60% of the plot of land to earn income,that it was not a case where the land was acquired by the government in lieu of the assessee providing free of cost consent to the Police Department,that the government had compensated the assessee by giving 60% of the land free of cost, that what had happened in reality was that as per the government of Maharashtra resolution the balance 60% of the plot of land which was earlier earmarked for reservation was de-reserved for development,that it was factually and legally incorrect to hold that the assessee rec....

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....t it was allowed to utilize the remaining 60% of plot of land for commercial purposes,that the assessee completed the construction of quarters/ station by the end of September, 2009,that the buildings were handed over to the Police department for free,that it had incurred an expenditure of Rs. 4.59 crores for constructing the quarters and stations,that the AO held that assessee had become the owner of the plot of land after handing over the possession of the quarters and station to the Police department, that he made an addition of Rs. 2.65 crores to the income of the assessee,that the FAA reversed the order of the AO.In our opinion, the order of the FAA does not suffer from any legal or factual infirmity,that he had given a finding of fact that assessee was the owner of the plot of land from the very beginning, that it had executed a lease for 99 years at the rent of Rs. 1 per year in favour of the Police department,that if the assessee was not the owner of the plot of land there was no need for the government to enter in to a lease.Reserving or de-reserving of the plot of land cannot decide the issue of ownership of the plot of land.By constructing the plot of land the assessee h....