TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 469
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....firm consisting five partners. According to the Ld. counsel, one Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran are the joint owners of the land at Old State Bank Colony, III Street, Tambaram. Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran entered into an agreement with the assessee-partnership firm and also executed power of attorney in favour of Shri Mehul H. Doshi. In fact, according to the Ld. counsel, the undivided share of land was sold by Shri Mehul H. Doshi on behalf of Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran. The sale proceeds of the land was credited in the books of account of the assessee-partnership firm. According to the Ld. counsel, the assessee developed the land as per the joint development agreement with Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran and claimed exemption under Section 80-IB of the Act. However, the Assessing Officer rejected the claim of the assessee on the ground that the profit on sale of the land was suppressed. According to the Ld. counsel, the market value of the land was paid by the assessee-firm to the land owners, therefore, it may not be correct to say that the taxable income was suppres....
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....o the Ld. counsel, no part of sale proceeds of undivided share of land was included in the computation of eligible profit under Section 80-IB of the Act. According to the Ld. counsel, the land forms integral part of the housing project. The gain on sale of land is also eligible for deduction under Section 80-IB of the Act. 5. Shri G. Baskar, the Ld.counsel for the assessee, further submitted that the partnership firm was constituted on 01.10.2008. The business of the partnership firm is to develop the land by constructing multi-storied residential flats. According to the Ld. counsel, 21 months before the formation of partnership firm, Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran had executed agreement for sale and also executed irrevocable power of attorney for sale of land to the prospective buyers. Therefore, according to the Ld. counsel, it is not correct to say that Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran colluded with the assessee-firm. Referring to the order of the CIT(Appeals), more particularly page 8, the Ld.counsel submitted that the Assessing Officer misunderstood the business transaction of the assessee with Shri V. Chandrasekaran and Sm....
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....it was shifted and the tax liability was reduced. For coming to a conclusion, the Assessing Officer simply presumed that children of Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran were inducted in the partnership firm. According to the Ld. counsel, merely because the children of Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran are partners in the partnership firm, there cannot be any presumption that taxable income was shifted or reduced. Other than imagination, according to the Ld. counsel, both the authorities below had no material to doubt the transaction. Therefore, according to the Ld. counsel, there is no reason to disallow the claim of deduction under Section 80-IB of the Act. 8. On the contrary, Shri S. Bharath, the Ld. Departmental Representative, submitted that Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran entered into a joint development agreement on 05.01.2007, copy of which is available at page 49 of the paper-book, in respect of 2.61 acres of land located at Old State Bank Colony, III Street, Tambaram. According to the Ld. D.R., the assessee-partnership firm constructed a housing project known as "Nakshatra" comprising 195 dwelling un....
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....n either side and perused the relevant material available on record. In both the appeals, the issue arises for consideration is disallowance of deduction claimed by the assessee under Section 80-IB(10) of the Act. The Assessing Officer disallowed the claim of the assessee under Section 80-IB(10) of the Act that the profit is approximately 50%. The Assessing Officer also found that the profit of the business included the cost of land sold by Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran. The Assessing Officer further found that a part of cost of land was diverted as share of profit to Shri Prem Chandrasekaran and Shri Akil Chandrasekaran, the children of the land owners. 11. There is no dispute about the statutory conditions imposed for allowing deduction under Section 80-IA of the Act. For disallowing the claim of the assessee, the Assessing Officer referred the provisions of Section 80-IA(10). We have carefully gone through the provisions of Section 80-IA(10) of the Act. Section 80-IA of the Act is for deduction in respect of profits and gains from industrial undertaking or enterprises engaged in infrastructure development. Whereas, Section 80-IB of the Act is for ded....
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....this cannot be said that the value determined for transfer of part of land or the entire land is a device to increase the profit of the assessee-firm. 13. The Assessing Officer as well as the CIT(Appeals) found that the market value of the land was fixed at a very lower rate since the children of the owners of the land were partners in the assesseefirm. There may be a justification for making allegation like this when the children of the land owners alone are partners. In this case, apart from the children of the owners, there are other partners who are not related to the land owners at all. The other partners may not cooperate with the land owners to purchase the land or to take the land on joint development so as to reduce the profit of the firm. Moreover, the land owners also may not transfer the land for a price less than the market value since the third party partners who are in the assessee-firm indirectly get the benefit. Therefore, when the third party individuals are partners in the assessee-firm apart from the children of the land owners, this Tribunal is of the considered opinion that the contention of the Revenue that the land in question was transferred to the partne....