TaxTMI 
TaxTMI 
2021 (1) TMI 1069
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....was selected for scrutiny under CASS and statutory notices were duly issued and served upon the assessee. 4. The facts in brief are that during the year the assessee cancelled an agreement entered into for purchase of flat and received Rs. 2,50,00,000/- as compensation along with refund of money already paid towards purchase of flat amounting to Rs. 10,75,99,999/-. The said flat was booked by the assessee as confirmed by the builder vide a letter of intent dated 09.02.2010 wherein the various terms and conditions for purchase of property were duly mentioned. The said flat was comprised on 15th floor admeasuring 1626 sq. ft. carpet area in the building known as Waterfront Tower together with a parking space at Shahid Bhagat Singh Road, Colaba, Ward A, Mumbai. The said letter of intent had to be cancelled as the sellers were not allowed to raise the building height upto a level on which the flats were to be constructed. The assessee after giving various reminders and legal notices to the builders succeeded in getting a compensation of Rs. 2,50,00,000/- along with refund of money already paid as evidenced by the letter dated 29th March 2014. Pertinent to mention that these rights we....
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....as any impediment faced by the appellant which prevented him to produce the additional evidence. On the other hand the appellant contents that he did not get opportunity to explain the existence of right in the under construction property and hence he was prevented by sufficient cause and his case fell under clauses (a), (b) & (d) of Rule 4GA of IT Rules 1962. Considering the facts and circumstances of the case, the submissions made by the appellant that it did not get sufficient opportunity appears to be fair and reasonable. Thus, in view of these facts the additional evidence has been ado-fitted and considered in deciding the grounds of appeal of the appellant. Primary and crucial question in the case is whether the assessee and his nature of activities are concerned 'the right to specific performance to get the 2400 A and B class shares each of Kunol Corporation allotted on completion of the building waterfront in Colaba, Mumbai which entitled the share holder to the use occupation and possession of flat numbers 15A, 15B, 15C and 15D in Waterfront building, Colaba Mumbai' constitute a 'capital asset' within the meaning of section 2(14) of the IT Act 1961 or not....
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.... of the LOI clearly states that 'the LOI is issued on an understanding and assurance given to the company that the assessee and the intending transferors shall enter an agreement for sale in accordance with this letter of intent and the assessee undertook to execute the agreement for sale and pay necessary stamp duty and registration charges'. Moreover, the company did not submit any proof of the so called sale of four flats on the 15th floor of waterfront building to be constructed to the assessee and it appears that these three intending purchasers were directly connected with the company and when they were fully aware of absence of approvals from MCGM and shares and securities, they could not have transferred anything which they themselves did not own. Moreover, the nature of the business carried on by the company is also suspect from the kind of business activity carried on by the company later on, as is evident from internet search. Assessee's authorized representative in his submissions dated 17/8/2018 has not been able to rebut any of these issues but has merely quoted judicial decisions without reference to the facts of the case. Moreover, to make submissions ....
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....capital loss from the receiving back of funds given earlier alongwith the additional amount of Rs. 2,50,00,000/- by way of compensation con not be treated as consideration for the sale of an asset and hence the amputation of Rs. 37,09,596/- as long term capital loss by assessee is patently erroneous and the rejection of such a claim by AO is fully justified and its subsequent set off against long term capital gains of Rs. 34381531 by the AO is fully justified Taxability of compensation of Rs. 25000000 represents interest and stands confirmed by letter dated 29/3/2014 signed by the builder and the so called three intending purchasers Mehta Mittal and Bijalani. The issue of three cheques by Mehta Mittal and Bijalani also goes on to prove that the LOI dated 9/2/2010 was an LOI for 'deposit of money on the security of future assets of shares and securities to be created on completion of the waterfront building Colaba Mumbai. Hence the action of the AO in denying the classification of loss of Rs. 3,37,09,596/- as long term capital loss and its subsequent claim for its set off of against long term capital gains of Rs. 3,43,81,531/-and taxability of receipt of Rs. 2,50,00,000/- as inc....
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....paid Rs. 10,75,99,999/- also got a compensation of Rs. 2,50,00,000/- for loss of opportunity caused and it was agreed that assessee would not have any right title or interest in the said units in terms of letter dated 09.02.2010. The Ld. A.R. submitted that the agreement vide which the flats were booked certainly create a right in favour of the assessee in the immovable property and which upon cancellation would entitle the assessee to receive compensation along with the money already paid which would be consideration for surrender of that rights in immovable property i.e flats. The Ld. A.R. submitted that whatever the assessee received upon cancellation is liable to be taxed under the capital gain head and was rightly treated and did so as stated hereinabove. The Ld. A.R. submitted that the compensation along with the refund of money was treated as sale consideration and after reducing an indexed cost of Rs. 16,63,09,595/-, the loss was rightly claimed by the assessee as long term capital loss. In defence of his arguments, the Ld. A.R. relied on a series of decisions as follows: 1. CIT vs. Vijay Flexible Containers (1990) 48 Taxman 86 (Bombay) 2. K.R. Srinath vs. ACIT (2004) 1....
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....would entitle the assessee to a property, cannot be regarded as an "agreement". Since the law in force in the State of Maharashtra governing transfer of flats has not been followed, mere issue of LOI cannot be treated as having been created a capital asset or right therein. Therefore, the receipt of consideration on cancellation of LOI was correctly brought to tax under the head 'Income from Other Sources'. In view of the above position of law it is requested that the Assessment Order be upheld. As regards 2nd proposition of the assessee, as propounded by the Ld. Counsel during the course of hearing, that in case the compensation received on cancellation can not be subjected to capital gain provisions as there is no cost of acquisition, it is submitted that this proposition ought to be dismissed at inception itself. This proposition may find some standing only if it is accepted that issue of LOI has created a capital asset. If it is accepted that LOI created a capital asset then there is no need to proceed to Proposition-2. But if, in view of the above discussion, it is held that the LOI did not create a capital asset then both arguments of the assessee fail. Therefore, it is onc....
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....tter dated 09.02.2010 as a deposit raising agreement for construction of future assets to be created by the builder and developer and as such it did not confer any rights of ownership at all and therefore refused to treat the said right arising out of the said letter of intent as capital assets within the meaning of section 2(14) of the Act and treated the compensation of Rs. 2,50,00,000/- as income from other sources as same represented the interest on the money deposited by the assessee with the builder. Now the issue before is whether the assessee has any legal right accrued in his favour vide letter of intent dated 09.02.2010 or not and whether Rs. 2,50,00,000/- could be treated as part of the sales consideration as has been treated by the assessee to calculate the long term capital loss. 10. We have heard the rival submissions extensively and found that though the assets were not in existence which were to be bought by the assessee on 09.02.2010 namely flat No. 15A, 15B, 15C & 15D on 15th Floor. Pertinent to mention that the assessee has obtained requisite permission to construct the said building namely Waterfront Tower up to the height of 230 feet and the company was in the....
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....et includes transferring or enabling the enjoyment of any immovable property by way of becoming a member of or acquiring a share in a company or by way of any agreement or arrangement or in any other manner whatsoever. The case of the assessee finds support from the decision of the jurisdictional High Court in the case of CIT vs. Vijay Flexible Containers (1990)48 taxman 86 Bombay wherein it has been held as under: A capital asset is defined by section 2(14) to mean "property of any kind held by an assessee ". The -word, 'transfer' in relation to a capital asset is defined in section 2(47) to include, the sale, exchange or relinquishment of the asset or the extinguishment of any rights therein. Thus, the right to obtain a conveyance of immovable property fell within the expression 'property of any kind 'used in section 2(14) and was, consequently, a capital asset. The assessee acquired under the agreement for sale the right to have the immovable property conveyed to him. He was under the law entitled to exercise that right not only against his vendors but also against a transferee with notice or a gratuitous transferee. He could assign that right what he acquire....