TaxTMI 
TaxTMI 
2018 (7) TMI 1169
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.... head 'Income from House Property. . 1.2 The learned CIT (A) failed to appreciate that the rent was earned from v persons living on the land which has been used by the Appellant for its business purposes. 1.3 The learned CIT (A) failed to appreciate that rental income from property which is mainly "land along with some dilapidated buildings"'cannot be taxable under the head of income from house property. 1.4 Without prejudice to the above, the learned CIT (A) failed to appreciate that the Appellant is entitled to deduction of municipal taxes of Rs. 4,648 from its gross annual value and interest expenditure u/s 24(b) in respect of borrowings for acquisition of property, income of which is chargeable to tax under the head of income from house property. 2. Income from assignment of Development Rights of Chaudhary Plot at Thane: 2.1 The learned CIT (A) erred in considering the monetary consideration of Rs. 25,00,000 and non-monetary consideration of 10,500 saleable built up area ( Valued at Rs. 2,62,50,000) from assignment of Development Rights of Chaudhary Plot net of expenses incurred in relation to the same as income for the finan....
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....land with structures comprising four chawls standing thereon, with a view to develop and construct thereon commercial property by demolishing all the existing structures. The appellant has further submitted that it had not constructed any of the chawls from which rental are received but the said structures along with the tenants already exist at the time of acquisition of the land, and that the said land is the inventory for carrying on business in normal course as builders and developers. I do_not find merit in said contentions of appellant, as far as the chargeability of rental income under the head "income from House Properly" is concerned. I find that there is no stipulation in Section 22 that the rented out structures should be of any particular standards, or that the same should have been constructed by the assessee himself. The Section 22 stipulates the "Annual Value" of property to be charged under that section, and the Annual Value is determined as per Section 23 of the Act. As per Section 23, even if any particular owned property is not rented out, still it may be considered as deemed rented out in certain cases, and the Annual Value of such property is charged to tax u/s....
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....said two properties: A.Y. Loan Rs Interest paid Stock in trade AY 2009-10 14.18 crores 1.14 crores Rs 14.88 crores AY 2010-11 15.26 crores 1.26 crores Rs. 17.20 crores The appellant has taken Datar Block property along with tenants. Originally there .were 45 tenants in said property. In prior years appellant got vacated many tenants and paid huge sums to tenants against surrender of tenancy rights. The appellant had 27 tenants as on 31-3-2010. The appellant has paid huge amounts of sum of Rs. 59.70 lacs during the year for surrender of tenancy rights of 7 tenants in Datar Block properties: Sr. No Date of payment Name of tenant Kholi /room no Amount Rs (1) 22-4-2009 Meghasyam Pandey 46 3,66,000 (2) 6-8-2009 PandurangS Burve 50 7,50,000 (3) 16-5-2009 Jayesh Makwana 34 7,50,000 (4) 24-9-2009 Chintamani Raje 39 9,04,000 (5) 30-11-2009 Sushila D Gore 35 9,50,000 (6) 15-9-2009 MadhavV.Datar 49 10,00,000 (7) 7-8-2009 Kishore H Rathod 34 Bldg no 3 12,50,000 Total payment 59,70,000 ....
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.... intention is simply letting the property or any portion thereof the resultant income must be assessed as income from house property. If on the other hand, the main Intention is of exploiting immovable property by way of commercial activities, and then the resultant income must be held to be business Income" In case of CIT vs Neha Builders P Ltd. (2007) 164 Taxman 342 Gu] it is held that" If property is given on rent and property is held as stock in trade then property income represents business income. In case of CIT vs Lokholdings (2010) 189 Taxman 452 (Bombay), it was held as under :- Assessee-flrm was Involved In business of development of properties - In course of Its business, it received money in advance from its customers intending to purchase flats in properties developed by it - As said moneys could not be utilized immediately for purpose of business, assessee temporarily invested surplus amounts from such moneys in banks and other concerns and earned interest thereon - Whether, on facts, interest Income In question would be assessable as Income from business as claimed by assessee and not as Income from other sources - Held, yes In this case al....
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....s is justified. For this proposition, the case laws relied upon by the ld. Counsel of the assessee referred in the submissions hereinabove are germane and support the case of the assessee, particular the case law from the Hon'ble Bombay High Court in the case of Lokholdings (supra) is of particular emphasis. Accordingly, in the background of the aforesaid discussion and precedent we set aside the orders of the authorities below and decide the issue in favour of the assessee. 6. Apropos ground No. 2: Brief facts of the case are that the AO observed that during the year under consideration as per agreement dated 19.06.2009, assessee had entered into an agreement with M/s Shree Sachidanand Developers for the development of Choudhary Plot at Thane for a monetary consideration of Rs. 25 lakhs and constructed area with all amenities equivalent to 7,395 sq.ft. carpet area (equivalent to 10.500 sq.ft.) saleable residential constructed area on pro-rata basis in the building to be constructed on the said property. It was observed that the assessee had considered the monetary consideration of Rs. 25 lakhs received in the construction account, and no income was shown by assessee on t....
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....5 lakhs simultaneously with the execution of said agreement, (B) 7395 Sq. Ft. of carpet area, equivalent to 10500 Sq. Ft. of Built up area on pro-rata basis in the building constructed on sale property. The parties in joint consultation shall decide the said area to be allotted to the Owners after issuance of Commencement Certificate but before commencement of work on the site. Simultaneously with the execution of the agreement, Owners have handed over to the Developers the physical possession of the said property as Licensee, and henceforth, the Developers would be irrevocably and unconditionally entitled to approach the Planning Authority and to obtain the legal possession of the said property. Simultaneously with the execution of the agreement, the Owners had executed a Power of Attorney constituting the Developers as their true and lawful Attorney to do various work relating to the property including the sanction of plans, specifications for construction on the said property, to carry out construction and development of said property, save and except the Saleable area to be given to the owners, to sell the remaining flats and premises etc. The Owners shall execute in the name o....
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.... the contract or of the part performance thereof. " In the present case, the possession of immovable has been given in part performance of the contract; Contract (registered has been entered into, consideration is ascertained i.e. Rs. 25,00,000/- plus 10500 sq.ft. of built-up area; Transferee (the appellant) has performed his part of contract by giving possession of property and also by executing irrevocable power of attorney in favour of the developers; and the rights of parties are expressly provided by the terms of the contract, Moreover, the appellant itself has captioned the said agreement as "Agreement for Development & Sale". Therefore, the appellant can safely be construed as having transferred the said property in the year under consideration. Merely because part of the sale consideration was receivable by the appellant in the form of certain built-up area in the proposed building did not change the character of the transaction, as it was only a mode of receiving the sale consideration. Therefore, the appellant was liable to offer the income to tax in the year of entering into said agreement dated 19.06.2009, i.e. in the A.Y. 2010-11 under consideration. Therefore. I find ....
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....e have heard both the counsel and perused the records. The submission of the ld. Counsel for the assessee is summarized below:- " The appellant has shown Choudhary plot of Thane as stock in trade ie business asset which subsequently appellant has given to M/s Shree Sachidanand Developers for development, as appellant Is not able to redevelop the plot because of preoccupation in other work. The appellant as stated earlier Is entitled 10500 sq ft constructed area of project which appellant will get in future. The Plan of project is not approved during the year, no construction work has admittedly started during the year. So there is no question of accrual of income during the year under consideration. On Identical facts in case of ITO vs Ffnian Estate Developers Pvt. Ltd. [2012] 23 taxmann.com 360 (Delhi Trib) It was held that as there is no approval of plan of project nor there was any construction activity started during the year so there Is no accrual of Income during the year. Reliance Is also place on decision in case of Fardeen Khan vs ACIT [2015] 58 taxmann.com 186 (Mumbal Trib.) ii) Further the appellant has entered in to ....
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....per revenue reorganisation method regularly employed and followed by appellant. In case of CIT vs Motilal Patel & Co. (1988) 40 Taxrnan 336 (Guj) it Is held that unless and until sale transaction of immovable property is completed by means of registered sale deed there cannot be earning of profit. The fact that the sale consideration Is received prior to such registration, in pursuance of an agreement to sale would not make any difference. The appellant reduced Rs. 25,00,000/- from work In progress as appellant being developer and Is following booking of profit on percentage completion method. During the year under consideration there is no construction activity of the said project even the plan of project is not approved by competent authority during the year. Thus as per accounting standard the appellant has correctly reduced the work in progress by Rs. 25 lacs as same is part of sale proceeds only when In future appellant gets 10500 sq ft built up area as per development agreement till that time said amount is not part of sale proceeds. iv) The appellant has shown profit relatable to sale of Choudhary plot In AY 12-13 and after considering such profit ....