TaxTMI 
TaxTMI 
2018 (1) TMI 888
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....1. The lower authorities have erred in holding that the sum of Rs. 11,84,72,772/- received on account of transfer of development rights in the underlying land as taxable in the captioned assessment year. Such conclusions are opposed to evidences on record, the various agreements on record and the relevant byelaws, regulations etc. 2. It is contended that the consideration of Rs. 11,84,72,772/- has not accrued to the appellant in the year under consideration. 3. The act of transferring development rights in the land being subject to various obligations on the part of the appellant, procuring regulatory approvals from various authorities etc., it is contended that the consideration of Rs. 11,84,72,772/- has not accrued to the appellant. 4. The determination of income from transfer of development rights by ignoring the land development expenses of Rs. 4,39,51,811/- is wrong. Such land development expenses are fully allowable while determining the profit arising from transfer of development rights. 5. The lower authorities have erred in disallowing a sum of Rs. 26,00,000/- u/s 40A(3) of the Act. Such conclusions are opposed to evidences on record. ....
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....s obligations on the part of the appellant, procuring regulatory approvals from various authorities etc., it is contended that the consideration of Rs. 21,73,57,638/- has not accrued to the appellant. 4. The determination of income from transfer of development rights by ignoring the land development expenses of Rs. 2,77,20,842/- is wrong. Such land development expenses are fully allowable while determining the profits arising from transfer of development rights. 5. The lower authorities have erred in holding that the sum of Rs. 1,17,89,636/- has accrued to the appellant as interest on Fully Convertible Debentures. Such conclusions are opposed to the Terms of issue of debentures. 6. The enhancement of income of the appellant by a sum of Rs. 5,00,000/- by the Commissioner of Income Tax (Appeals) is wrong and is without jurisdiction. 7. It is contended that the Commissioner of Income Tax (Appeals) has no jurisdiction to enhance the income of the appellant by determining/ discovering new sources of income. 8. It is contended that the provisions of section 2(22)(e) of the Act are not applicable to the impugned sum of Rs. 5,00,000/-. ....
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.... being undertaken during the course of development of residential project, the provisions of section 2(22)(e) of the Act are not applicable at all. 10. The appellant craves leave to add, alter, amend or withdraw any of the grounds of appeal at the time of hearing. 5. The following grounds have been raised in ITA No. 3638/Del/2014 in the case of Pyramid Realtors Pvt. Ltd. vs ACIT :- 1. The lower authorities have erred in holding that the sum of Rs. 21,50,19,995/- received on account of transfer of development rights in the underlying land as taxable in the captioned assessment year. Such conclusions are opposed to evidences on record, the various agreements on record and the relevant byelaws, regulations etc. 2. It is contended that the consideration of Rs. 21,50,19,995/- has not accrued to the appellant in the year under consideration. 3. The act of transferring development rights in the land being subject to various obligations on the part of the appellant, procuring regulatory approvals from various authorities etc., it is contended that the consideration of Rs. 21,50,19,995/- has not accrued to the appellant. 4. The determination o....
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....64,501/- is allowable as Business Loss under the provisions of Chapter IV-D of the Act. 8. The lower authorities have erred in holding that the sum of Rs. 23,96,73,768/- received on account of settlement of debts as taxable in the captioned assessment year. Such conclusions are opposed to evidences on record, the various agreements on record and the relevant bye-laws, regulations etc. 9. It is contended that the consideration of Rs. 23,96,73,768/- has not accrued to the appellant in the year under consideration. 10. The lower authorities have erred in holding that the sum of Rs. 2,35,05,066/- has accrued to the appellant as interest on Fully Convertible Debentures. Such conclusions are opposed to the Terms of issue of debentures. 11. The enhancement of income of the appellant by a sum of Rs. 1,64,74,410/- by the Commissioner of Income Tax (Appeals) is wrong and is without jurisdiction. 12. It is contended that the Commissioner of Income Tax (Appeals) has no jurisdiction to enhance the income of the appellant by determining/ discovering new sources of income. 13. It is contended that the provisions of section 2(22)(e) of the Act ....
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....ng the provisions of section 250(4) of the Income Tax Act, which empowers Ld. CIT(A) to conduct further enquiry on the aforesaid issues involved in this case. 4(a) The order of the CIT(A) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, alter or amend any / all of the grounds of appeal before or during the course of the hearing of the appeal. 9. In the aforesaid Appeals, all the assessees have also filed the following common additional ground of appeal, except the difference in figure. For the sake of convenience, we are reproducing herewith the following additional ground in respect of ITA No. 3582/Del/2014 (AY 2008-09) in the case of Saga Developers Pvt. Ltd.- "That in the absence of registration of shareholders agreement under the Registration Act, there could be no transfer exigible to tax by reference to Section 2(47)(v) of the Income-tax Act, 1961 read with Section 53A of the Transfer of Property Act, 1882 and consequently the addition of Rs. 11,84,72,772/- being the profits alleged to have accrued to the appellant under the stipulated transaction, is arbitrary, unjust and bad in law." 9.1 At the t....
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....not raised this issue before the lower authorities. Hence the assessees now cannot raise these issues before the ITAT. 9.4 After hearing rival submissions, we are of the considered view that the basic issues in all the above appeals are taxation of profits arisen on handing over of possession of development rights together with land in terms of the shareholders agreement dated 18th May 2007. On the basis of the said shareholders agreement, the AO inferred that because the stipulated sale considerations have been received by the appellants and development rights together with land would vest in SPV (Special Purpose Vehicle), that tantamount to delivery of the possession of the land and the same amounts to transfer for the purpose of levy of tax in terms of the definition of transfer given u/s 2(47)(v) of the IT Act as also observed by the Special Auditors. Though according to the assessees, on the date of agreement, land was not an approved land in the absence of necessary permission from competent authorities for development of land and accordingly the profits in relation to the development rights together with land would be accrued in the years as and when the approvals were ma....
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....s owned certain lands. 10.4 Later on, on 23rd February 2007 a development agreement was entered into by the lead member Saamag Construction Ltd. with GDA for the development of integrated township over 72.90 acres of land located at Shahpur Bameta. It was further provided under the agreement that GDA will provide assistance in acquisition of the land other than the land owned by the consortium parties which requires to complete the land for integrated township, i.e. 72.9 acres. Keeping in view the consideration the huge finances required for the development of the integrated township, the consortium parties entered into a shareholders' agreement with a financial partner M/s SARE [Cyprus] SPV3 Ltd. on 18th May 2007. 10.5 Under the shareholders agreement, one of the group companies, M/s Saamag Realtors Pvt. Ltd., was a confirming party to the shareholders agreement, which also holds 10.39 acres of land and made SPV for the purpose. As per agreement, after signing the same the name of SPV would have to be changed to 'SARE SAAMAG REALTY PVT. LTD'. The other parties of the Saamag group hold 36.2246 acres of land on the date of the agreement. 10.6 The salient features of the ....
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....oject FAR of 34,94,371 sq ft, then Saamag shall pay a penalty to SARE @ Rs. 635/- per sq ft of such shortfall. ii) In case Saamag fails to acquire the remaining land and also fails to obtain the sanction of the prorata project FAR, then SARE shall have the right to obtain from Saamag its equity and convertible debt at par so that SARE could achieve its investment objective. In such case, Saamag shall be liable to pay to SARE a penalty amounting to 10% of the extra equity infused by SARE in the SPV. 3.1.11 In the event, Saamag is not able to obtain any statutory approval, permission, sanction including but not limited to completion certificate or approval of building plan due to failure to acquire land or otherwise and such failure on the part of SCL results in a loss to the SPV. M/s Saamag shall be liable to compensate SPV and SARE. 4.2.2 The capital contribution of the Saamag towards the capital of SPV shall remain in lock in period till the Saamag has undertaken all the statutory and other compliances and obtained all the necessary approvals, sanctions, permissions etc. from the appropriate Government authorities required by the SPV to undertake the dev....
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....rt indemnify the SPV and SARE for any or all present and future claims that may arise with respect to or which are connected to the area/land for which the development rights have been vested in the SPV. 8.2.8 All charges payable towards leveling of land, land-filling etc., approval of township scheme, master plan approval or any FAR relates fees will be paid by SCL. 8.2.21 The SCL hereby undertakes to indemnify and keep the SPV and its affiliates and officers, directors, employees, agents and advisors harmless from and against any losses, damages, liabilities, suits, proceedings, actions, costs or expenses (including reasonable attorney's fees and other dispute resolution costs) that may be incurred, suffered or instituted (a) as a result of non-compliance with or breach of the undertakings and representations made by the SCL in this agreement, (b) as a result of any act of omission or commission or negligence in contravention of this agreement by SCL, and/or on the part of its officers, directors, employees and agents, (c) as a consequence of the third party claims against or legal dues or any nature on SCL in connection with the subject matter of this agreement....
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....orities. He stated that when the terms and conditions have been mentioned in a document, then a taxing statute has to be applied in accordance with the legal rights of the parties to the transactions as accrued under the agreement as held by the Hon'ble Supreme Court in the case of CIT vs. Motor & General Stores Pvt. Ltd. in 66 ITR 692. He, however, stated that the nomenclature and description given to a contract is not determinative of the real nature of the document or of the transaction thereof. These have to be determined from overall terms of the documents and all the rights and liabilities as well as results flowing therefrom and not by picking and choosing certain clauses as done by the AO. He further stated that in order to ascertain the true nature and meaning of several clauses of the contract, the words of each clause must be so interpreted as to bring them into harmony with the other clauses of the contract and not with reference to only of few terms or with just one of the rights flowing therefrom as held by the Supreme Court in the case of State of Orissa vs. Titagarh Paper Mills Co. Ltd. in [1985] 60 STC 213. Mr. Rastogi stated that the Hon'ble Supreme Court in the c....
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....ility is not registered u/s 17(1A) of the Registration Act, 1908 and accordingly cannot be considered to be a document in the nature contemplated u/s 53A of the Transfer of Property Act because section 17(1A) of the Registration Act states that if such document is not registered, then it shall have no effect in the eyes of law for the purpose of section 53A of the Transfer of Property Act. 10.10.4 Ld. Counsel of the assessee stated that such provisions of the law have been judicially noticed and considered by the Supreme Court in the case of CIT vs. Balbir Singh Maini in 398 ITR 531. In the case of Balbir Singh Maini, the Hon'ble Supreme Court, while construing the provision of section 2(47)(v) of the IT Act with reference to the effect of section 17(1A) of the Registration Act which was inserted by the Amendment Act of 2001 which made compulsory the registration of the documents contemplated u/s 53A of the Transfer of Property Act and held that after the commencement of Amendment Act, 2001, in the absence of registration of such documents with the Registration Authorities, these documents cannot be considered to be a document of the nature referred to in section 53A of the Tran....
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....tium transferred the development rights including the land and delivered the vacant and physical possession of the land to the SPV. Mr. Rana further stated that the consortium agreement was registered with GDA on 10th February 2006 and the licence has also been granted by GDA and hence the appellant cannot state that it is not registered agreement. Mr. Rana further stated that in the case of CIT vs. Dr. T.K. Dayalu in 202 Taxman 531, the Karnataka High Court and also the Bombay High Court in the case of Chaturbhuj Dwarka Dass Kapadia vs. CIT in 260 ITR 491, it has been held by the Courts that in the case of joint development agreements, if the assessee has given the possession and has received a non-refundable advance, then it amounts to transfer u/s 2(47)(v) of the Act and tax has to be levied in the year in which such agreement has been made and accordingly the AO has correctly levied the tax in the Assessment Year 2008-09 wherein the shareholders agreement has been made. 10.13 However, in rejoinder Ld. Counsel of the Assessee stated that as far as the surrender alleged to have been made during the course of search, it was made under pressure and under some ignorance and misco....
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....lopment agreement in relation to the land in which the possession of the land was also delivered to the developer. We further find that the Hon'ble Supreme Court held that prior to the year 2001, the contract referred to in section 53A of the Transfer of Property Act does not require any registration and if the possession of the property has been handed over under a transaction, then it would amount to transfer for the purpose of levy of tax. But after the amendment to the Registration Act, 1908 by way of Amendment Act, 2001, a provision of section 17(1A) has been introduced. Section 17(1A) of the Registration Act states that such agreement wherein the possession of the immovable property is already given, then such agreement is required to be compulsorily registered and if such documents are not registered on or after commencement of the Amendment Act, 2001, then they shall have no legal effect for the purpose of the said section 53A of the Transfer of Property Act. The Hon'ble Supreme Court, after considering the provision of section 2(47)(v) of the IT Act read with section 53A of the Transfer of Property Act and section 17(1A) of the Registration Act at pages 548-549 observed as....
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.... the High Court, namely, whether under the JDA possession was or was not taken; whether only a licence was granted to develop the property; and whether the developers were or were not ready and willing to carry out their part of the bargain. Since we are of the view that sub-clause (v) of Section 2(47) of the Act is not attracted on the facts of this case, we need not go into any other factual question." 11.2 We note that in the present case, the very shareholders agreement dated 18th May 2007 is admittedly not registered u/s 17(1A) of the Registration Act, 1908 which is the condition precedent to give effect to the provision of section 53A of the Transfer of Property Act. The Department has also not brought any evidence contrary to the fact. The registration with GDA is not the registration as contemplated u/s 17(1A) of the Registration Act, 1908. Therefore, in view of the above facts and the law as laid down by the Hon'ble Supreme Court, the provisions of section 2(47)(v) of the IT Act are not applicable to the transactions embodied in the shareholders agreement dated 18th May 2007 as well other agreements dated 29th September 2007 and 19th October 2007 because all agreements ....
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....ax cannot be levied on hypothetical income. In CIT v. Shoorji Vallabhdas and Co. [CIT v. Shoorji Vallabhdas and Co., (1962) 46 ITR 144 (SC)] it was held as follows: (page 148) "... Income tax is a levy on income. No doubt, the Income Tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in bookkeeping, an entry is made about a 'hypothetical income', which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account." The above passage was cited with approval in Morvi Industries Ltd. v. CIT [Morvi Industries Ltd. v. CIT, (1972) 4 SCC 451 : 1974 SCC (Tax) 140 : (1971) 82 ITR 835] in which th....
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....land and in case they failed to provide such FSI, then they would be liable for penal consequences and so much so the consortium parties could not withdraw their amounts fixed under the agreement. In this way, unless and until the approvals and permissions are granted by GDA, it cannot be said that any income accrued to the appellants. 11.8 It was brought to our notice that such approvals have been granted by GDA in subsequent years and that too in piecemeal manner. As and when GDA had granted the approvals, the appellants have appropriated the proportionate amount out of the advance so received under the shareholders agreement and offered the same for tax. The assesses counsel pointed out that such offer had been made in Assessment Years 2010-11, 2013-14 and 2014-15. The assessments for the Assessment Years 2013-14 and 2014-15 have been made under scrutiny assessment and the Department has also accepted the same. 11.9 Keeping in view of the facts and circumstances of the case as explained above, the ground raised by the assessees relating to taxation of profits on transfer of development rights together with land is allowed. Ground No. 4 of all appeals relates to admissib....
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.... (iii) expenditure incurred after the transfer of land would be disallowed because after the transfer of land, there was no obligation to incur expenditure to develop the said already transferred land; and (iv) there was no financial term either on the shareholders agreement or in the development agreement. 12.2 The assessee states that the payments to the parties have been made through account payee cheques. Mr. Dinesh Pandey in his statement recorded by the Investigation Wing has never stated that the parties to whom the payments have been made were bogus parties and on the contrary Mr. Dinesh Pandey stated that land development expenses are genuine. Because the summons have been returned back, that does not mean that the parties are bogus. The AO may adopt other means for the purpose of investigation and enquiries as held by the Supreme Court in the case of CIT vs. Orissa Corporation Pvt. Ltd. in 159 ITR 78 (SC). As per clause 8.2.8, the appellants were under obligation to provide overall developed land in all respects including leveling and land filling etc. and the expenses for the leveling and land filling had to be borne by the assessees. 12.3 As far as the ....
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....ating to FCD Interest in ITA No. 3582/Del/2014: Ground No. 5 relating to FCD Interest in ITA No. 3617/Del/2014: Ground No. 5 relating to FCD Interest in ITA No. 3618/Del/2014: Ground No. 5 relating to FCD Interest in ITA No. 3638/Del/2014: Ground No. 10 relating to FCD Interest in ITA No. 3655/Del/2014: 13. The Ld. Counsel of the assesses stated that as per the shareholders agreement, which was entered into by the assessees for the development of an integrated township. The assessees were owning the lands and the value of development rights together with land were valued at Rs. 103,45,74,870/- in terms of clause 3.1.2 of the agreement. As per the terms of clause 3.1.2, 40% of the price so fixed was to be paid to the appellants in the form of shares and convertible debentures in proportion to their land holdings. 13.1 Under the shareholders agreement, not only the rights of the land owner parties were determined but also the various obligations had also been fixed which includes the timely acquisition of the balance land, getting approvals and sanctions from the competent statutory authorities for the development of land as well as the speci....
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.... deserves to be taxed irrespective of the fact whether the development rights together with land have been transferred or not. 13.5 After hearing both the parties and perusing the records, we find no doubt that the debentures have been allotted by the SPV as part of the sale consideration of development rights together with land in terms of the shareholders agreement dated 18th May 2007, but because there were various obligations which had to be carried out by the assessees, more particularly obtaining of approvals and permissions and because till all the conditions are completed, the appellants could not withdraw any amount from the SPV. Hence we are of the view that the accrual of interest on FCD is also linked with the transfer of development rights together with land and accordingly it is correctly credited to the WIP account. Basically, it is a revenue neutral exercise because ultimately it will increase the profits in the year as and when approval is made and the profits have been offered by the assessees. 13.6 In the case of UP State Industrial Development Corporation (supra), the said assessee used to underwrite the public issue of shares of various companies against ....
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....14.3 The assessee has come forward in the present appeals against the action of the Ld. CIT(A) wherein he has enhanced the income of the assessee with an amount which had been received from other group companies. The assessee objected to the action of Ld. CIT(A) on the following grounds: (i) No opportunity has been granted by the CIT (Appeals) before enhancing the income, hence the enhancement so made by CIT (Appeals) is against the law and in violation of natural justice. (ii) It is a settled rule of law that unless and until the assessee falls within the ambit of charging section by clear words, he cannot be taxed by implications. Hence the charging section has to be construed strictly and for this purpose the appellant relied on the CWT vs. Eliss Bridge Gymkhana in 229 ITR 1. The appellant states that the addition as made by the CIT (Appeals) is not only against the very purpose of provision of section 2(22)(e) of the IT Act but is also not covered by the provision of section 2(22)(e) of the IT Act. (iii) The provision of section 2(22)(e) of the IT Act is a deeming provision. Hence the deeming provision should be construed strictly and be confined and ....
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....he company deliberately refused to distribute it as dividends to the shareholders, but adopted the device of advancing the said accumulated profits by way of loan or advance to one of its shareholders, it was plain that the object of such a loan or advance was to evade the payment of tax on accumulated profits under section 23A. It will be remembered that an advance or loan which falls within the mischief of the impugned section is advance or loan made by a company which does not normally deal in money-lending, and it is made with the full knowledge of the provisions contained in the impugned section. The object of keeping accumulated profits without distributing them obviously is to take the benefit of the lower rate of super-tax prescribed for companies. This object was defeated by section 23A which provides that in the case of undistributed profits, tax would be levied on the shareholders on the basis that the accumulated profits will be deemed to have been distributed against them. Similarly, section 12(1B) provides that if a controlled company adopts the device of making a loan or advance to one of its shareholders, such shareholders will be deemed to have received the said am....
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....between the loan and deposit. In the case of loan, it is ordinarily the duty of the debtor to seek out the creditor and to repay the money according to the agreement, whereas, in the case of depositor to go to the depositee and make a demand for it. 14.3.7 In the case of Bombay Steam Navigation Co. Pvt. Ltd. vs. CIT in 56 ITR 52, the Hon'ble Supreme Court held that a loan of money undoubtedly results in a debt, but every debt does not involve a loan. Liability to pay a debt may arise from diverse sources, and a loan is only one of such sources. Every creditor who is entitled to receive a debt cannot be regarded as a lender. 14.3.8 In the case of CIT, Lucknow vs. Bazpur Co-operative Sugar Factory Ltd. in 177 ITR 469, the Hon'ble Supreme Court further stated that for the purpose of loan there must be relationship of borrower and lender in the given transaction and if there is no relationship of borrower or lender then the amount received cannot be considered as loan. 14.3.9 In the case of Durga Prasad Mandelia's vs. Registrar of Companies (1987) 61 Companies Case 479, the Bombay High Court held as under: "There can be no controversy that in a transaction of a deposi....
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.... scheduled bank in connection with the export of capital plant and machinery outside India; (v) interest on any loan in foreign currency sanctioned by any corporation or bank referred to in sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) of clause (9) for the import of capital plant and machinery from a country outside India." 14.3.11 The question arises before the Courts, whether the interest on debentures and Govt. Securities are liable to Interest tax or not. The Courts have consistently held that the debenture and the Govt. Securities do not bear the characteristics of loans and advances but they are the mode of investment. Hence, the interest received on debentures and Government Securities are not liable to tax under Interest Tax Act though they carry the interests thereon. To support his view, he relied upon following cases laws:- * 259 ITR 312 (Bom), CIT vs. United Western Bank Ltd. * 259 ITR 295 (Bom), Discount & Finance House of India Ltd. vs. S.K. Bhardwaj * 87 ITD 11 (Del) PN Bank vs. DCIT * 115 ITD 218 (Ahd) (SB) Gujarat Gas Finance Service Ltd. v. Assistant Commissioner of Income Tax. * [200....
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....aving sufficient accumulated profits and the shareholders are common. 14.5 After hearing both the parties and perusing the relevant records, it reveals that they are in the form of current and inter banking accounts and contain both types of entries i.e. giving and taking the amount and appear to be a current account and cannot be considered as loans and advances as contemplated u/s 2(22)(e) of the IT Act. 14.5.1 We find that the Hon'ble Gujarat High Court in the case of DCIT vs. Shutz Dishman Biotech Pvt. Ltd, Tax Appeals No. 958 and 959 of 2015 dated 21st December 2015 held that if the accounts are inter banking accounts maintained by the parties, then they are not covered under the provision of section 2(22)(e) of the IT Act and no additions can be made as deemed dividend u/s 2(22)(e) of the IT Act. Similar propositions have also been made by the Punjab & Haryana High Court in the case of CIT vs. Suraj Dev Dada in 367 ITR 78 as well as the Mumbai Bench of the Tribunal in the case of Bombay Oil Industries Ltd. vs. DCIT reported in 28 SOT 383 and Ravindra R. Fotedar vs. ACIT in 167 ITD 100. 14.5.2 Keeping into consideration such position of law, we hold that the additions....
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....he IT Act because the amount of Rs. 26 lakhs was paid by the appellant to Saamag Construction Ltd. as repayment of the debt, hence the addition in dispute is deleted. I.T.A. No. 3655/Del/2014 Ground No. 5 - Legal & Documentation Expense - Rs. 1,46,02,000/-. 17. As per the facts of the case, as is clear from the assessment order, the appellant had incurred the expense amounting to Rs. 1,46,02,000/- under the head "Legal and Documentation Expense" to increase the share capital of SVP from Rs. 10 lakhs to Rs. 240 crore as per the terms and conditions of the shareholders agreement dated 18th May 2007 and the same was to be borne by the appellant but debited under the head "Work in Progress" (WIP). The AO was of the view that because the development rights together with land under the shareholders agreement dated 18th May 2007 have to be determined on account of the delivery of the possession of the land, hence for the purpose of determination of profits, as accrued from the transfer of development rights together with land, the cost of the land as well as the WIP has to be taken into account. The AO noted that the expenses incurred in relation to the increase in share capital ....
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....e non-registration of the shareholders agreement dated 18th May 2007, the provisions of section 2(47)(v) of the IT Act cannot be applied and transactions cannot be considered as transfer for the purpose of levy of income-tax. Therefore, no specific addition on this issue is called for because even the assessee had not claimed the same by way of debiting to the profit & loss account. This ground has become infructuous. Grounds No. 8 and 9 in ITA No. 3655/Del/2014 - Addition on account of settlement of debts - Rs. 23,96,73,768/-. 18. This issue also relates to the construction of very shareholders agreement dated 18th May 2007. The facts of the case are that the assessee had provided funds aggregating to Rs. 5,68,31,602/- from time to time to M/s Saamag Realtors Pvt. Ltd. (SRPL) for purchase of land meant for integrated township at Village Shahpur Bameta, Ghaziabad. With the help of these funds, the said SRPL had purchased land measuring 10.39618 acres. As per the shareholders agreement dated 18th May 2007, the said SRPL was converted into Special Purpose Vehicle (SPV) and later the name changed to SARE Saamag Realty Pvt. Ltd. after the introduction of the other financial partn....
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....ttling the rights and liabilities with SARE at the time of joining of the agreement, it has been agreed amongst the parties that the value of development rights together with land owned by SPV, M/s Saamag Realty Pvt. Ltd., which was also part of the overall land of the integrated township measuring 72.9 acres, i.e. FSI of 34,94,371 sq ft be also valued at the same price at which the development rights together with land of 36.2746 acres has been made and because the funds for the acquisition of land of 10.39618 acres was provided by the appellant, i.e. M/s Saamag Construction Ltd. and also of the related expenses for the approval and sanction of the land and other obligations have to be borne by M/s Saamag Construction Ltd. Hence it was agreed that the debt of Rs. 5,68,31,602/- of Saamag Construction Ltd. be settled at Rs. 29,65,05,370. Such agreed amount of alleged development rights together with land of 10.39618 acres has been agreed to be paid not in the form of cash but in the form of shares and fully convertible debentures. 18.2.2 In order to secure SARE, it was further agreed that such amount will also be subjected to prohibitive clause contained in clause 4.2.2 of the sh....
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....nt amount because such expenses, which were actually related to the land owned by SRPL but had to be incurred by the appellant on account of commercial expediency as per the terms and conditions contained in the shareholders agreement. 18.3 The Ld. CIT (DR), though relied upon the orders of the authorities below, but he contended that the transactions relating to the settlement of debt in terms of clause 3.1.7 are totally independent from the transfer of development rights together with land as described under the shareholders agreement dated 18th May 2007. It has to be seen independently because it actually relates to the amounts advanced by the appellant from time to time to SRPL though admittedly utilized by SRPL for the purpose of land acquisition which was also part of the overall land measuring 72.9 acres required for the development of integrated township. The provision made is under the agreement for providing the total FSI area of 32,94,371 sq ft has no relevance for determination of the dispute. 18.4 After hearing both the parties and perusing the records, and after considering the chart provided by the assessee's counsel for arrival of the figure of settlement debt....
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....ous constraints, the project has not been completed and accordingly the said amount is still in the hands of SARE Saamag Realtors Pvt. Ltd. (SPV). 18.4.2 Therefore, taking into consideration the overall facts of the case as well as the terms and conditions of the shareholders agreement and the manner in which the figure of settlement debt has been arrived at, we are of the view that the so-called settlement of debts is the combination of revaluation of land owned by SRPL, which have been made SPV under shareholders agreement, coupled with the chargeable interest on the amount advanced by appellant to SRPL plus the expenses required to be incurred and borne by the appellant under shareholders agreement. Therefore, in the interest of justice, we direct the AO to calculate the interest on the amount of advance made by the appellant to SRPL from the date of its advancement @ 14% per annum and tax the same in the year under appeal and out of the balance amount of so-called settlement of debt whatever amount the appellant has incurred on legal expenses of Rs. 1,46,02,000/- for increase in authorized capital of SRPL and loss on wrong registry expenses Rs. 1,43,64,501/- incurred in rela....
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....that the transactions based on which the Auditor and the Assessing Officer have inferred and made the payment have not been materialized at all. The assessee has not purchased such land from the proposed sellers at all. No doubt, the Auditor and the Assessing Officer have restricted the addition only in respect of the figures mentioned under the head "Money given in cash" but even the cheque amount, which has been mentioned in the papers, has not been recorded in the books of account but there is no comment by the Assessing Officer or the Special Auditor. When the assessee has not purchased any land from the persons mentioned in the papers, no addition can be made on the basis of such papers. The Assessing Officer has not made any independent inquiry from such personsand in the absence thereof no addition can be made. We further note that the Assessing Officer did not bring any adverse material on record or gave a finding with cogent evidence contrary to that of the assessee. AO has not brought any independent corroborative material suggesting that the assessee has purchased such land and has made the payment as recorded in seized papers. Hence, in the absence of any such action by....