TaxTMI 
TaxTMI 
2017 (2) TMI 1497
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....ief facts: 3. Assessee-Society is registered under the Maharashtra Cooperative Society Act, 1960. It owned 12 three floored buildings comprising of eight residential Flats in each building on a plot of land measuring around 9973. 19 m². The plot of land on which the said buildings were constructed was held by it as a lessee under a long-term lease of 90 years, beginning from 16/05/1977, vide lease deed the executed on 12/12/2006. Apart from that in August, 1997 MHADA alerted and sold to the assessee additional Floor Space Index (FSI)of 2880 m² in respect of the entire plot and it also agreed to allowed the Society RG, Tit Bits area of 2783. 66 m² in respect of entire plot for premiums less consideration recorded therein in 2010 the Society along with 96 of its members decided to redevelop the property by demolishing the old buildings and constructing new buildings upon the land measuring 9973. 19 m² by utilising the aggregate FSI of 2302 8 m² consisting of land of 5032. 15 m² utilised in old buildings. The Society share of its FSI purchased of 1728 m² and right to acquire an additional FSI of 16267. 85 granted by MHADA to the Society. Accordingl....
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....opening and issue of notice u/s. 143(2)of the Act. 4. 1. In the appellate proceedings before the First Appellate Authority (FAA), the assessee argued that for the AY. under appeal time-limit to issue notice as per the provisions of section 143(2)available to the AO was up to 30/09/2013 and the time-limit for completing the scrutiny assessment u/s. 143(3) was available up to 31/03/2014, that the notice u/s. 148 was issued on 26/03/ 2013, that at the time of issue of the assessment notice time-limit for issuing notice u/s. 143 (2)of the Act and making scrutiny assessment u/s. 143(3)had not expired, that the time-limit for conducting regular assessment had not elapsed the assessment made by the AO was void ab initio. It relied upon four case laws and stated that order passed by the AO should be quashed as same was bad in law. 4. 2. The FAA held that there was no merit in the arguments advanced by the assessee. that it had not file return of income in time, that the AO had received separate information about the development agreement being executed on 26/04/2010-involving consideration of Rs. 51. 36 crores, that he had initiated the re-assessment proceedings accordingly, that assesse....
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....eveloper in their individual capacity, that the receipt of such income was disclosed by them in their respective returns, that corpus fund contributed by developer to the Society was also offered in its return, that amounts received by members of the society could not be assessed in the hands of the assessee, that provisions of Section 50C were not applicable, that the society was not the owner of the land, the agreement entered into with the developer was an agreement for transfer of development rights, that the provisions of Section 50C applied to land/building or rights in respect of land or building and not the development rights, that the society continued to be a lessee, that the development rights had no cost of acquisition, that the transfer of such rights would not be taxable, that the new right came into existence because of new Regulation, that right accrued to the society were akin to TDR , that the members had formed a society, that MHADA created lease hold rights in favour of society from the year 1996-97, the transfer of lease hold was not covered by provisions of section 50C of the Act, that the amount of Rs. 15crores was taxed twice i. e. in the hands of the societ....
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....r had offered receipt of income in their returns, that the AO and the FAA were of the view that payment made by the developer was to be taxed in the hands of the society. 4. 4. 1. Here, it will be useful to take notice of the case of Raj Ratan Palace Co-operative Housing Society(supra), wherein the Tribunal had dealt with the similar issue. It that matter the society consisted of 51 members and was owner of certain property. It entered into an agreement with a developer for development of said property. The Tribunal recorded the following facts: "The assessee was a registered housing society having 51 members and duly elected managing committee. It was the owner of a property admeasuring 3316 sq. meters or thereabouts together with 'R' building. The society invited offers from builders for redevelopment of its property by construction of a new multi-storey building behind the 'R' building, by means of T. D. R. from elsewhere and by the consumption of available F. S. I. of the said property, after demolishing the existing bungalow. In pursuance of the above 'N' submitted tender for development of society's said property. The assessee society vide agreement dated 18. 05. 1996 ag....
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....mpensation to the society and members. The sum was quantified at Rs. 2, 00, 16, 828/-. Out of this only a sum of Rs. 2, 51, 000/- was paid to the society. Admittedly, the remaining sum and the additional sum payable under clause 13 of the agreement dated 18-5-1996 was paid to the individual members of the society under 51 different agreements. Thus it was clear that the assessee did not part with any rights in property and did not receive any consideration except a sum of Rs. 2, 51, 000. In such circumstances, one failed to see as to how there could be any incidence of taxation in the hands of the assessee. Besides, the order of the Assessing Officer was vague. It was not clear as to whether the sum in question was brought to tax as capital gain in the hands of the assessee or as income under section 2(24). Neither of the above provisions could be pressed into service for bringing the sum in question to tax in the hands of the assessee. As already seen that there was no receipt by the assessee except a sum of Rs. 2, 51, 000. The sum so received was for merely granting consent to consume TDR purchased by the developer from a 3rd party. The society continued to be the owner of the la....
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....society. No double taxation and no double deduction is one of the well recognised and fundamental principles of taxation. In our opinion, signing of agreement by the members or society cannot be base for taxing of income. As per the scheme of the Act, income received by any person or income accrued to him has to be taxed. In the case under consideration, income was received by the members and they had offered the same for taxation. 5. We also hold that Society was only the lessee and what was transferred to the developer was development rights not land or building . Section 50C of the Act stipulates as under: "Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both.... . " No authority is required to hold that terms 'land or building' 'or both' do not include development rights and that in the case before there was transfer of such rights only. In light of the above discussion and respectfully, following the judgment of the Hon'ble High Court in the case of Raj Ratan CHS(supra), we hold that FAA was not justified in taxing the sum of Rs. 53. 50 crores in the hands of the assessee, as same was....
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....r considering the available material the FAA held that payment of Rs. 15 crores by the developer to the society could not be treated as payment towards corpus of the society, that the AO had rightly held that the disputed amount was to be assessed as income from other sources, that out of the sum of Rs. 15 crores Rs. 3. 5 crores were to be paid on execution of the development agreement, that balance amount was to be paid on expiry of 30 months or fulfillment of certain conditions, that receipt of Rs. 11. 5 crores would accrue to the assessee in future, that same along with the interest amount to be received in subsequent years could not be taxed during the year under appeal, that only real income could be taxed and not any future or imaginary income. Finally, he held that on Rs. 3. 50 crores was taxable, under the head income from other sources, in the hands of the assessee for the year under consideration. 8. 2. Before us, the AR argued that the assessee had received Rs. 3. 50 crores only during the year, that the CIT(A) had wrongly assessed the income under the head income from other sources. The DR supported the order of the AO and argued it. The assessee was to receive Rs. 15.....
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..... We find that the developer had made payment to MHADA, that the AO treated it as income of the assessee. In our opinion, payment made to a government agency in persuance of an agreement cannot be treated income of assessee. As far as principle of application of income is concerned, we would like to state that the true test for the application of the rule of diversion of income by an overriding charge, is whether the amount sought to be deducted, in truth, never reached the assessee as his income. Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the decisive fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to....