AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (1) TMI 888
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....m 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. 6. It is contended that the impugned payment of Rs. 26,00,000/- being repayment o....
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....3,57,638/- 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/-. 9. It is contended that the transaction of providing monies and availing monies from/with other member companies having being undertaken during the course of development of residential project....
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....e 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 of income from transfer of development rights by ignoring the land development expenses of Rs. 5,29,98,579/- 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 h....
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....ord 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 are not applicable to the impugned sum of Rs. 1,64,74,410/-. 14. It is contended that in the absence of accumulated profits, the addition of Rs. 1,64,74,410/- under section 2(22)(e) of the Act is wrong and is opposed to evidences on records. 15. It is contended that the transaction of providing monies and availing monies from/with other member companies having being unde....
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....e 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 threshold, Ld. Counsel of the assessee stated that the aforesaid additional ground is a legal ground based on the principle enunciated by the Hon'ble Supreme Court in the case of CIT vs. Balbir Singh Maini in Civil Appeal No. 15619/2019 dated 4th October 2017 reported in 398 ITR 531 wherein, the Hon'ble Supreme Court held that in the case of immovable property, after the year 2001, the delivery of possession of the immovable property in terms of an agreement ca....
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....cause 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 made by the competent authorities. The assessee stated that in the Assessment Years 2010-11, 2013-14 and 2014-15, such profits have been shown and offered for assessment. 9.5 In our view, the aforesaid ground appears to be a legal ground only and has been raised based on the judgments of the Hon'ble Supreme Court in the case of Balbir Singh Maini (Supra) and the related facts, i.e. the shareholders agreement dated 18th May 2007 have already been considered by the low....
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....ownship, 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 relevant clauses of the shareholders' agreement are reproduced as under:- Clause 2.5 The loan facility of Rs. 25 crores granted by Punjab National Bank and Indian Overseas Bank, on mortgage of land, be transferred in favour of SPV and also performance guarantee of Rs. 4,75,00,000/- provided by GDA. 2.6 In case Saamag fails to obtain permission to transfer the loan facility in favour of SPV, then Saamag shall repay the whole amount and obtain a No Dues Certificate at its own cost and then SARE shall infuse the withheld amount as per clause 2.7. 3.1 The authorized capital of SPV....
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....e 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 development and construction of the project and final sale of units. Clause 8.2 - Responsibilities and Obligations of Saamag: 8.2.1 Saamag agrees and undertakes that the execution of the project by SPV is the responsibility and obligation of Saamag and such responsibility and obligation includes but is not limited to those stated in this agreement and Saamag shall be exclusively responsible for the project from the beginning till its completion. 8.2.2 Saamag shall issue separate and individual irrevocable power of attorneys pertaining to their respective share in the project area, in favour of the SPV in order to facilitate and develop, construct, transfer or....
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....curred, 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, or (d) infringement of intellectual property of SPV caused by SCL. 10.7 The aforesaid shareholders agreement was the main agreement and after that, further agreements were also made between the parties as and when the appellants acquired the land and such agreements in the year under consideration were dated 29th September 2007 and 19th October 2007. Whatever the sale considerations had been fixed under the shareholders agreement, the appellants had credited the same to the advance account in its books because they were of the view that keeping into consideration the overall terms of the contract, the agreement was in respect of the transfer of development rights together with land and because on the date of....
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....hat 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 case of Titagarh Paper Mills (supra) observed that a chameleon may change it colour according to its surrounding, but a document is not a chameleon to change its meaning according to purpose of the statute with reference to which it falls to be interpreted. 10.10.1 Ld. Counsel of the assesee further stated that in the instant case, the AO has not considered the very shareholders agreement as a whole but only considered clause No. 3.1.2 of the agreement and ignored the other clauses of the agreement containing the various obligations, liabilities of the assessees flowing from the other clauses of the contract as well as also ignored the various prohibitive and penal clauses flowing from the contract which have to be f....
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....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 Transfer of Property Act and in such situation the allowing of any possession to the transferee is immaterial. 10.10.5 Ld. Counsel of the assessee pointed out that the provision of section 2(47)(v) of the IT Act has been brought to the Statute Book by the Finance Act, 1987 with effect from 1st April 1988 and prior to that it has been consistently held by various High Court and the Supreme Court including the Jurisdictional High Court that the taxability in respect of transaction relating to immovable property accrued or arisen in the year in which the sale deed has been registered irrespective of allowing of the possession of the property at an earlier date. Such law was held in the following cases: Alapati Venkata Ramaya vs. C....
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....) 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 misconception of law and that is why later on the assessee had retracted from the same looking into the legal positions, which came to his notice about the year of accruality of income on transfer of development rights and land. Ld. Counsel of the assessee also stated that even the AO has not proceeded based on the surrender so made but he proceeded independently and at this moment the Revenue cannot justify its case based on the alleged surrender. 10.14 Ld. Counsel of the assessee further stated that as far as the registration with GDA is concerned, the same cannot amount to registration as contemplated u/s 17(1A) of the Registration Act, 1908, meant for compulsory registration of transfer of immovable property governed by the Transfer of Property Act with the Re....
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....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 under: "20. The effect of the aforesaid amendment is that, on and after the commencement of the Amendment Act of 2001, if an agreement, like the JDA in the present case, is not registered, then it shall have no effect in law for the purposes of Section 53A. In short, there is no agreement in the eyes of law which can be enforced under Section 53A of the Transfer of Property Act. This being the case, we are of the view that the High Court was right in stating that in order to qualify as a "transfer" of a capital asset under Section 2(47)(v) of the Act, there must be a "contract" which can be enforced in law under Section 53A of the Transfer of Property Act. A reading of Section 17(1A) and Section 49 of the Registration Act shows that in the eyes of law, there is no cont....
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....he 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 are unregistered agreements and accordingly no liability of tax can be fastened on the appellant merely on the basis that the possession of the land has been handed over by the appellant. Under the law, the appellant continues to be the owner of the land and has at no stage purported to transfer the rights taken to ownership to the SPV. 11.3 In the case of Balbir Singh Maini (supra), the Hon'ble Supreme Court, even after declaring that in the absence of registration of the joint development agreement u/s 17(1A) of the Registration Act, the provision of section 2(47)(v) of the IT Act is not applicable even if the possession has been handed over, has also examined the issue with reference to sections 4 and 5 of the IT Act on the point of accruality of income. The Hon'ble Supreme C....
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....e 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 this Court also considered the dictionary meaning of the word "accrue" and held that income can be said to accrue when it becomes due. It was then observed that: (page 340) ". ... the date of payment ... does not affect the accrual of income. The moment the income accrues, the assessee gets vested with the right to claim that amount even though it may not be immediately." This Court further held, and in our opinion more importantly, that income accrues when there "arises a corresponding liability of the other party from whom the income becomes due to pay that amount". 11.4 It follows from these decisions that income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party to pay the amount. Only then can it be said that for the purposes of taxability that the income i....
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....e 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 admissibility of land development expenses. 12. The Ld. Counsel of the assesses stated that the adjudication of this ground also arises out of construction of the said shareholders agreement dated 18th May 2007. The assessee's counsel stated that after development agreement was entered by the lead member, Saamag Construction Ltd., with GDA on 23rd February 2007 for the development of integrated township over 72.90 acres of land located at Village Shahpur Bameta, Ghaziabad for which huge finances were required for the development of the integrated township, the consortium parties, i.e. the assessees, entered into a share-holders agreement with a financial partner M/s SARE Cyprus SPV3 Ltd. As per the shareholders agreement, the object of the transfer of the land was fully developed and approved land as is clear from the various terms and conditions embodie....
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..... 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 disallowance of such expenditure by the AO merely on the ground that such expenditure have been incurred by the appellants after the transfer of land, it is submitted by the assessee that though the appellants had not transferred the development rights together with land on the date of shareholders agreement due to non-availability of the approvals/permissions from the competent authorities, but otherwise the agreement was in respect of the fully developed land and the consortium parties were under obligation to provide leveled land and the expenses in relation to the leveling and land filling etc. had to be borne by the appellants. Therefore, if it is held that the profits in relation to the transfer of development rights and land are being taxed in the Assessment Year 2008-09, then such expenses as incurred by the consortium parties are required to be reduced out of the considerat....
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....and 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 specified project area required for the development of the integrated township. All the expenses in relation thereto had to be borne by the appellants. The failure to comply with such obligations would result into breach of the terms of the agreement and the appellants had to face the penal consequences also. 13.2 Under the shareholders agreement, it was further provided that till the assessees obtained the approval from the competent authorities with regard to the development of the land as well as the completion certificate and till final release made, no amount could be withdrawn by the assesses. 13.3 The assessees counsel stated that looking into the terms and conditions of the shareholders agreement, it is clear that the agreement was an executory agreement involving delivery of the approved land in all respects to the SPV and till the approval is granted by the competent authorities and obligations are fulfilled, no ....
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....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 which it was entitled to receive underwrite commission and in case the public issues are not subscribed, then it had to subscribe the shares of companies. The said assessee did not credit the commission to profit & loss account but used to reduce cost of the shares. The Tribunal held that such practice is in consonance with the accounting policy, and the High Court and the Hon'ble Supreme Court affirmed the finding of the Tribunal. Therefore, the additions in dispute are deleted. Grounds No. 10 to 13 in ITA No. 3582/Del/2014: Grounds No. 6 to 9 in ITA No. 3617/Del/2014: Grounds No. 6 to 9 in ITA No. 3618/Del/2014: Grounds No. 11 to 15 in ITA No. 3655/Del/2014: 14. The aforesaid grounds relate to the issue with regard to the deemed dividend. The assesses are the group companies and are in the business of real estate development and were in the process of execution of various real estate projects including an integrate....
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....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 limited to the purpose for which they are created and should not be extended beyond their legitimate field as held by the Supreme Court in the case of CIT vs. Vadilal Lalubhai in 86 ITR 2 and 181 ITR 1 (Kerala), CIT vs. P.V. John. (iv) In the case of CIT vs. Sarathy Mudaliar in 83 ITR 170, the Hon'ble Supreme Court 14.3.1 In the case of CIT vs. Sarathi Mudaliar in 83 ITR 170, the Hon'ble Supreme Court, while considering the provision of Section 2(6A)(e) of the Indian Income-tax Act, 1922 (which is parimateria to Section 2(22)(e) of the IT Act), observed as under: "Sec 2(6a)(2) gives an artificial definition of 'dividend'. It does not take in dividend actually declared or received. The dividend taken note of by that provision is a deemed dividend and not a real dividend. The loan granted to a shareholder has to be returned to the company. It does not become the income of the shareholder. For certain purposes, the Legislature has deemed such a loan as 'dividend'. Hence, sec. 2(6A)....
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....(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 amount of the accumulated profits and would be liable to pay tax on the basis that he has received the said loan by way of dividend. It is clear that when such a device is adopted by a controlled company, the controlling group consisting of shareholders have deliberately decided to adopt the device of making a loan or advance. Such an arrangement is intended to evade the application of section 23A. The loan may carry interest and the said interest may be received by the company; but the main object underlying the loan is to avoid payment of tax." 14.3.3 It has been consistently held by the various High Courts and the Tribunals that the business transactions are not covered by the provision of Section 2(22)(e) of the Act. The payments under business transaction are outside the purview of the provision of Section 2(22)(e) of the Act. * 177 ITR 393 (Bom), CIT vs. Nagindas M. Kapadia * 173 Taxman 407 (Del), Ambassador Travels vs. * (2005) 1 SOT 142 (Mum), Seamist Properties Ltd. vs. ITO * (2007) 11 S....
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....87) 61 Companies Case 479, the Bombay High Court held as under: "There can be no controversy that in a transaction of a deposit of money or a loan, a relationship of a debtor and credit must come into existence., The terms "deposit" and "loan" may not be mutually exclusive, but nonetheless in each case what must be considered is the intention of the parties and the circumstances. In the present case, barring the assertion of the respondent that the moneys advanced by the company to the Associated Cement Companies Ltd. constitute a loan and offend section 370 of the Companies Act, there is nothing else to show that these moneys have been advanced as a "loan". In the context of the statutory provisions, the word "loan" may be used in the sense of a "loan" not amounting to a deposit. The word "loan" in section 370 must now be construed as dealing with loans not amounting to deposits, because, otherwise, if deposit of moneys with corporate bodies were to be treated as loans, then deposits with scheduled banks would also fall within the ambit of section 370 of the Companies Act. Therefore, moneys given by the company to other bodies corporate is a loan within the meaning of section 37....
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....nt Commissioner of Income Tax. * [2006]5 SOT 918 (Delhi)(SB) Housing & Urban Development Corporation Ltd. vs. JCIT 14.3.12 In the case of Creative Dyeing & Printing Pvt. Ltd. in ITA No. 3036/ Del/2005, the Delhi Bench, ITAT vide order dated 9.5.2008 has held that if the amount received by the recipient company as investment from the payer company, then such amount will not be a loan and advance as contemplated u/s 2(22)(e) of the IT Act. The order of the Delhi Bench of the ITAT in case of Creative Dyeing & Printing Pvt. Ltd. has also been upheld by the Delhi High Court in CIT vs. Creative Dyeing & Printing Pvt. Ltd. in 318 ITR 476. 14.3.13 Section 2(22)(e) of the IT Act only considers those amounts which are having the characteristic of loans and advances. In the instant case, a transaction between the group concerns is not having a character of loans and advances but these are the current accounts. The transactions in current accounts are also outside the purview of section 2(22)(e) of the IT Act as held in the following cases: * 28 SOT 383 (Mum Trib) Bombay Oil Industries Ltd. vs. DCIT * 367 ITR 78 (P&H) CIT vs. Suraj Dev Dada * 167 ITD 100 (Mum Trib) Ravindra R. Fo....
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....ons as made by the CIT (Appeals) in terms of section 2(22)(e) of the IT Act are not correct because such amounts received cannot be considered as loans and advances. Even otherwise also, the payer companies had already made their investment in capital field more than the accumulated profits and in that situation it cannot be considered that those companies were having physical possession of accumulated profits capable of being disbursed. Therefore, the additions in dispute stand deleted. Grounds No. 5 to 8 in ITA No. 3582/Del/2014: 15. There were certain transactions between the assessee and its group concern M/s Saamag Construction Ltd. The Special Auditors, after noticing such transactions, had inferred that it amounts to cash payment u/s 40A(3) of the IT Act and advised to make the addition of Rs. 26 lakhs. The AO on such advice made the addition of Rs. 26 lakhs u/s 40A(3) of the IT Act. 15.1 Ld. Counsel of the assessee stated that the assessee and the other company were involved in the business of real estate development at Village Shahpur Bameta, Ghaziabad and for this purpose there were requirements of funds for acquisition of land and other business purposes. During the ....
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....ital expenditure as held by the Hon'ble Supreme Court in the case of Punjab State Industrial Development Ltd. vs. CIT in 225 ITR 792 as well as in the case of Brook Bond India Ltd. vs. CIT in 225 ITR 798 and accordingly the same cannot be allowed as deduction out of the profits accrued on account of transfer of development rights together with land. Accordingly, the AO disallowed the same though the appellant has not specifically claimed the same by way of debiting to the profit & loss account. 17.1 Ld. Counsel of the assessee stated that the assessee had not claimed such expenditure in its profit & loss account and because the profits from the transfer of development rights together with land have to be accrued and determined in the year in which the approval is received by the appellant from the competent authorities, therefore if any disallowance has to be made, that has to be made in subsequent years while computing the profits from development rights together with land as and when it has to be determined, but he stated that such expenses had not been incurred for the increase in authorized share capital of the company but have been incurred for the increase in the authorized ....
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....s SPV3 Ltd. 18.1 The assessee states that all receipts are not income, it is only those receipts which have the characteristic of income is chargeable to tax as held by Supreme Court in the case of Parimisetti Seetharamamma vs. CIT in 57 ITR 532. The assessee's counsel stated that no doubt in the shareholders agreement it is shown as settlement of debt in favour of the assessee, but in fact it represents the revaluation of land owned by SRPL itself but recovered from SARE while settling the rights and liabilities in relation to the land owned by SRPL, which have been ultimately made SPV, forming part of overall land of the integrated township measuring 72.9 acres, i.e. FSI of 34,94,371 sq ft at the time of joining f the agreement. Such mechanism was adopted because of the reason that under the shareholders agreement, the SRPL, the group company, was made SPV and this land of 10.39618 acres of land has been debited at cost in the books of SRPL and once the SARE would join the SRPL, it would be benefited without any efforts. To prove this fact, the assessee filed a chart showing how the figure of settlement of debts with reference to the development rights together with land owned b....
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....ich prohibits the withdrawal of the amount which reads as under: "4.2.2 It is agreed that the contribution of the parties of the first part and DP towards the capital of the SPV, shall, individually and jointly, remain in lock in period till the time Saamag has undertaken all the statutory and other compliances and obtained all the necessary approvals, sanctions, permissions etc. from the appropriate Government, governmental bodies and agencies required by the SPV to undertake the development and construction of the project and final sale of the units without need and as part of the project to the prospective buyers, to the satisfaction of SARE." 18.2.3 On the basis of the terms and conditions contained in clause 4.2.2 of the agreement, the appellant states that till such conditions as contained in clause 4.2.2 are completed on the part of the appellant and that too till the satisfaction of SARE, no debt can be said to have accrued to the appellant with this amount and because the appellant has no control over the amount, no income can be said to have accrued to the appellant. The appellant states that such an amount is under the control of SPV of which the SARE has become par....
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....tes to the development rights together with land owned by SRPL, which has been made SPV under the agreement. To our mind, basically it amounts to revaluation of the assets owned by SRPL in order to settle the amount recoverable from SARE, who has become a financial partner in SRPL at a later date by virtue of shareholders agreement, though under the law the difference between the revaluation and actual cost is not chargeable to tax, but the problem arises when this amount has been agreed to be paid to the assessee because of the amount provided by the assessee to SRPL for purchase of the stipulated lands as well as to bear all the expenses to be incurred in getting the approval and sanction of the land required from the competent authorities to develop the integrated township. Now the question arises whether it is a capital receipt in the hands of the appellant or a revenue receipt. If it is a revenue receipt, then in which year it is taxable. If we look from the angle of the revaluation of the assets, which appears to be correct as per the calculation provided by the assessee because no prudent businessman would settle the debt of Rs. 5,67,31,000/- provided in the years 2005 to 20....
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....e residual amount be treated as capital receipt not liable for tax. However, such amount of Rs. 1,46,02,000/- legal and documentation expenses and wrong registry expenses Rs. 1,43,64,501/- will not form part of WIP as claimed by the appellant against development rights together with land as discussed above. As a result, this ground is partly allowed. 18.5 In the result, all the Assessees Appeals are partly allowed. Revenue's Appeal in the case of DCIT VS. PYRAMID REALTORS PVT. LTD. - in ITA NO. 3689/DEL/2014 (AY 2008-09) 19. Facts narrated by the Revenue authorities are not disputed here, being identical and similar to the aforesaid cases as discussed above in Assessee's Appeal. Therefore, the same are not being repeated here for the sake of brevity. With regard to ground no. 1 relating to upholding the addition of Rs. 27,15,597/- made by the AO on account of unexplained expenditure u/s. 69C of the Act ignoring the fact that the disallowance was made on the basis of seized material is concerned, we find that during the course of search which took place on 29th January 2009, certain seized papers were found placed at Pages B1/A5, 69, 72 and 73. On the top of the papers seized, t....