TaxTMI 
TaxTMI 
2021 (11) TMI 407
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.... to challenge the disallowance and he ought to have given a finding in this regard. 4. The learned Commissioner (A) ought to have appreciated that in the light of the judgment of the Hon'ble Supreme Court in the case of S.A.Builders Ltd., vs. CIT (288 ITR 1), the advances were in the course of business and in the interest of business and consequently the deduction as claimed was liable to be allowed in full especially when the appellant had sufficient non-interest bearing funds. 5. The learned Commissioner (A) erred in upholding the impugned addition of Rs. 25,76,253/- towards alleged undisclosed scrap sale. 6. The learned Commissioner (A)ought to have refrained from upholding the computation of capital gains on the transfer of property to M/s.Gopalan Enterprises. 7. On the facts the learned Commissioner (A) ought to have allowed the cost of purchase of steel claimed by the appellant while computing the capital gains. 8. The learned Commissioner (Al ought to have appreciated that the amount of Rs. 3,36,29,479/- being the surplus on account of sale of improvements having offered under the head "Income from other sources" and the same ....
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....refrained from upholding the impugned additions. 17. Without prejudice, the learned Commissioner (A)erred in not giving any finding with regard to levy of interest u/s.234A, 234B and 234C of the Act. 18. The learned Commissioner (A)ought to have appreciated that interest under section 234A, 234B and 234C of the Act are not leviable in the case of the appellant. 19. Without prejudice, the interests levied are excessive and liable to be deleted in toto. 20. Without prejudice, the additions are excessive , arbitrary and unreasonable and liable to be deleted in toto. 21. For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed." 2. Originally the assessee's appeal in ITA No.1057/Bang/2010 was disposed of by this Tribunal vide order dated 30.4.2012 wherein certain issues were remanded back to the AO for fresh decision. The AO while giving effect to the order of the Tribunal in his order u/s. 143(3) r.w.s. 254 of the Act, confirmed the additions. Against this, the assessee went in appeal before the CIT(A) who confirmed the additions. Now again the assessee is in ap....
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....ndly be deleted. 5. The ld. DR submitted that it is apparent that the amount of Rs. 17,26,100 has been added back to the final computation of income although there is no specific discussion by the AO on this issue. It is clear from the assessment order u/s 143(3) r.w.s. 254 r.w.s 144 of the Act (which is presently under adjudication) that the impugned assessment has been passed in pursuance to the directions of the ITAT vide its order dated 30/04/2012. A perusal of the ITAT's order reveals that no specific discussion on this issue or directions on this regard have been given in this regard. It is apparent therefore that, the said issue has attained finality at the level of AO's original assessment order and the CIT(A)'s order. In these facts and circumstances, it was incumbent upon the AO to sustain the existing position in his impugned order. In this background the issue raised, therefore, does not remain a subject matter of adjudication. In these facts & circumstances no interference is called for. The assessee's grounds of appeal on this front does not emanate from the order of the ITAT, which forms the basis of the impugned order u/s 143(3) r.w.s. 254. 6. We h....
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....he same requires to be deleted. In the alternative, the statement of Sri Ajmeera should have been given credence to and at least Rs. 10 lakhs should have been allowed out of Rs. 25,76,253 and if at all any addition was required, it could only be in respect of the balance. 10. The ld. DR submitted that the assessee's submissions on the issue are not only vague but also unsupported by clear documentary evidence or justifiable explanations in spite of the opportunities and clear directions of the Tribunal while setting aside the issue for fresh examination before the AO. In such circumstances, it was incumbent upon the assessee to produce the relevant party particulars, confirmations of account and bank details with regard to the scrap-sales. It is evident from the AO's order that, in spite of adequate opportunities, the assessee failed to establish the veracity of scrap sales to the extent of Rs. 25,76,253. 11. Further, the AO has clearly brought on record the questions posed to Shri. S. K. Ajmera during the survey operation (vide question No. 5 of the statement recorded) regarding the impugned sales, in respect to which it was only stated by him that, an amount of Rs. ....
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....y evidence to substantiate its claim that income had already been offered to tax in earlier years and it was not clear as to whether earlier record available with the AO had been considered while arriving at the conclusion that no evidence was produced by the assessee. However, in the remand proceedings also, the assessee failed to produce relevant evidence in respect of its claim. Even after going through the documents available with the AO in the form of part ledger account and Profit & Loss account submitted by the assessee during the assessment proceedings, it was found by the AO that only scrap sale to the extent of Rs. 31,45,974 out of total scrap sale of Rs. 57,22,227 was credited in the ledger account as scrap sale and the balance was not offered for taxation. Hence the lower authorities rightly brought to tax the balance amount of Rs. 25,76,253 which is based on material found during the course of survey and the assessee was not able to reconcile the same, even after providing opportunity of hearing before the lower authorities. Therefore, the addition is justified and this ground is dismissed. 16. Ground Nos. 6 to 8 are regarding sustaining addition of capital gain on ....
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....arties who had sold steel and also the details with regard to the expenses incurred for construction of the compound by way of fencing. The alternate plea that the assessee having offered Rs. 3,30,29,479 as income on account of improvement as aforesaid was not given a set-off in determination of capital gains. In other words, having taken the full consideration of Rs. 14 crores for the purpose of computation of capital gains, it is submitted that the AO should have excluded the income derived by way of Rs. 3,30,29,479 which has been offered and requires to be deleted from the total income. 20. Further, it is submitted that the AO should have allowed the claim for fencing. It was an undisputed fact that the premises had a solid fencing with steel barbed wire all over the area covering the area sold of 1,19,049 sq.ft. This has also been taken notice of by the CIT(Appeals) in his order dated 30.06.2010. Though the CIT(Appeals) has concurred with the AO that the assessee did not give any details with regard to the expenses incurred, there was no denial of existence of the boundary fencing with barbed wire which could not have come on its own without any expenditure. It was also a fa....
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....splitting and segregating the consideration of Rs. 14 crores. The AO, on the other hand has not disputed the genuineness of the revised agreement vis-a-vis the original agreement, but has raised plausible issues in respect of the artificial split of the consideration which essentially relates to one single unit of property. 24. It is therefore to be held that the improvements in the form of compound wall, building sheds, etc., are intrinsically a part and parcel of the land property as a whole which was sold by the assessee. Accordingly the provisions of LTCG are attracted to the entire receipt of Rs. 14 crores. The AO's action on this account is therefore to be upheld. 25. Regarding the assessee's claim of Rs. 1,63,70,521 as expenses purportedly towards leveling, boundary work and fencing, disallowance was made in the absence of valid evidence to justify the said expenditure. The CIT(A) upheld the AO's order. The Assessee had clearly failed to establish its claim during the assessment or appellate stage or even during the survey operation, wherein Shri Ajmera (whose statement was recorded) failed to furnish requisite proof or explanation in this respect. The ITAT in ....
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....ssessee. However, he directed the AO to take appropriate rectification action after due verification of the facts and after affording necessary opportunity to the assessee in this regard. Being so, the assessee cannot have any grievance on this count. However, we make it clear that the AO has to carry out the directions of the CIT(Appeals) in para 9.4 of his order. With these observations, this ground of the assessee is dismissed. 30. Ground Nos. 9 to 16 are with regard to sustaining the capital gain in respect of transfer of property to IDEB of Rs. 43,6172,341. 31. The assessee had executed a JDA with IDEB on 30.03.2007 for developing 1,93,879 sq.ft. of land. On the very same day, there was a General Power of Attorney [GPA] to the said company in connection with development of the property. Also, a sale agreement was executed on the same day with IDEB for transfer of land and building to be built which would fall into the owner's share in the JDA to the developer. All the agreements are placed in the Paper Book. The ld. AR submitted that from the JDA, it could be noticed that it was agreed to between the parties that possession would be given to the developer in pursuance of....
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....s was to be paid earlier. Thus, there was no possession contemplated on or before 31.03.2007. 33. The ld. AR submitted that in this case, the last payment of refundable deposit was made only on 19.09.2007 as per the Ledger extract in the books of the assessee. Accordingly, even by applying the provisions of Section 2(47)(v) of the Act, there was no "transfer" to justify the computation of capital gains in the relevant year. The judgment of the Hon'ble High Court of Karnataka in the case of CIT & Anr vs. Dr.T.K.Dayalu (2011) 60 DTR (Kar) 403 will have no application. On the other hand, the decision of the ITAT, Bengaluru Bench, Bengaluru in the case of CIT & Anr vs. N. Vemanna Reddy dt. 18.08.2014 in ITA No.591/2008 would apply reported in 1 DTR 321, which was confirmed by the High Court of Karnataka. Even assuming that possession has been given on 30.11.2007, capital gain would arise for the assessment year 2008-09 and not for the relevant assessment year. Thus, the ld. AR submitted that on this ground alone the impugned computation of capital gains as made is required to be deleted. In fact, possession of the entire property continued in the hands of the assessee and the factor....
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....IT vs. Balbir Singh Maini, 398 ITR 531 (SC), the Hon'ble Apex Court in Para 18 of the judgment considered the conditions to be satisfied under Section 53A of the Transfer of Property Act. The Hon'ble Apex Court considered the judgment in the case of Shrimant Shamrao Suryavanshi & Anr vs. Pralhad Bhairoba Suryavanshi (D) by LRs & Ors (2002) 3 SCC 676 at 682 wherein the condition of taking possession has been made as a condition precedent. Also, the Hon'ble Apex Court observed that the transferee must have done some act in furtherance of the contract and the transferee must perform or be willing to perform his part of the contract. Essentially, in the case of IDEB, it had not performed the contract or was willing to perform the contract. Mere making payment of part of security deposit cannot be said to be performance of the contract. Essentially the contract was to develop the property. On this count, there was no performance which has been carried out by IDEB especially before the end of the financial year related to the relevant assessment year. 36. Similarly, it is further reiterated by the Hon'ble Supreme Court in the case of M/s.Seshasayee Steels P. Ltd vs. ACIT (2020) 421 IT....
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....t of the agreement. In the case of the Appellant, it did not happen. The property continued to be in the control of the assessee especially during the financial year related to the assessment year 2007-08. Accordingly, in light judgment of the Supreme Court in the case of M/s.Seshasayee Steels P. Ltd, (supra), no transfer can be contemplated to apply Section 45 of the Act to bring to tax the capital gains so computed by the Revenue. 39. Consequently, it was submitted by the ld. AR that the capital gain of Rs. 43,61,72,341 brought to tax in this relevant year is without jurisdiction. The AO's view that handing over possession to the developer was not really required when the assessee ceased to have control over the property by virtue of the agreement, it is submitted that in order to apply the provisions of Section 2(47)(v) of the Act, to determine "transfer", having over possession was a condition precedent as held by the jurisdictional High Court in the case of Vemanna Reddy referred to supra. Accordingly, the observation of the AO in this regard is opposed to law and the capital gain as determined was without jurisdiction and liable to be deleted. 40. On the other hand, the....
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.... - Where the landowner and builder execute joint development agreement, if the consideration is receivable in built-up area to be constructed and handed over by the builder to the landowner, it is advisable to avoid the applicability of section 53A of the Transfer of Property Act. This can be achieved by mentioning in the agreements that license is granted to the builder to enter the premises and construct the building. The possession is retained by the landowner, which will be handed over as and when the built-up area is constructed and delivered. By this stipulation, the transfer will take place only in the year in which the built up area is received and not before. 43. Therefore in the assessee's case, the Tax incidence on capital gains will arise only when the possession of the built up area is handed over together with occupancy certificate by the developer. Reliance was placed on the following judgments of the Hon'ble Madras High Court:- - CIT v. Jeelani Basha, 256 ITR 282 - R. Vijayakshme v. Appu Hotels Ltd. 257 ITR 4 44. The ld. DR submitted that the crucial findings of fact recorded by the AO with regard to the contents of the JDA; agreeme....
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....tion involving the allowing of the possession of any immoveable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 o(1882),' or ......." 49. Section 53A of the T.P. Act, 1882, stipulates as under:- "53A. Part performance -Where any person constructs to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract taken possession of the property or any part thereof,' or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that the contract, though required to be registered, has not been registered, or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefore by the law for the time being in force, the trans....
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....cute a registered irrevocable Power of Attorney interalia empowering the DEVELOPER to alienate, sell, convey and lease the "DEVELOPERS CONSTRUCTED AREA" and OWNERS CONSTRUCTED AREA jar enabling the development of the land in the Schedule property and to obtain clearance, permissions, sanctions from the Income Tax Department whenever necessary ......... " 53. The ld. DR submitted that it is abundantly clear therefore that the rights of possession have been alienated to lDEB in letter and spirit. The contentions of the assessee in this regard are therefore not tenable with regard to transfer of possession. 54. He further submitted that apart from disputing the year of taxability in respect of the impugned transaction, it is not the assessee's case that the agreements dated 30/03/2007 with IDEB were not enforced or continued in the subsequent years. It is also not the assessee's contention that the aforecited agreements were either cancelled or that the deposits received from IDEB were refunded at a later date. Therefore the transaction of sale / JDA with IDEB remained intact, without the assessee having duly declared the transactions as liable to capital gains. The AO i....
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....f a capital asset effected in the previous year shall be chargeable to income-tax under the head capital gains and shall be deemed to be the income of the previous year in which the transfer took place. 58. Thus the fundamental features which determine the taxability of capital gain are that the gain ought to be from the transfer of a capital asset. This section has a large scope of its operation due to the presence of deeming provision which says that the gain shall be the deemed income of that previous year in which the transfer took place. This phrase can be interpreted in the manner that the total profits may actually be received in any other year, but for the purposes of S. 45, the gain shall be the deemed income of the year of transfer of the capital asset. It shall not be out of context, at this juncture, to mention an observation of the Hon'ble Authority of Advance Rulings in the case of Jasbir Singh Sarkaria, In re [2007] 164 Taxman 108 (AAR - New Delhi), that the expression used in sec. 45 is "arising", which cannot be equated with the expression "received" or even with the expression "accrued" as being used in the statute. The point which deserves notice is that t....
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.... from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall effect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof." 61. The doctrine of "part performance" is undoubtedly based upon the doctrine of equity. If one party has performed his part of duty then equity demands that the other party shall also perform his part of the obligation. If one party stood by his words then it is expected from the other party to also stand by his promise. Naturally an inequitable conduct of any person has no sanction in the eyes of law. 62. In the light of the above, now we proceed to examine the factual matrix of the present case in hand. 63. The starting words of section 53A are "where a person contracts", which means just the existence of the contract. The assessee is a "person" who has entered into a contract with the developer viz., IDEB Investments (P) Ltd. on 30.3.2007. This section says "to transfer" m....
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....n of the ld. AR Section 2(47)(v) of the Act cannot be applied to the facts of the present case. The judgment of the Hon'ble High Court of Karnataka in the case of CIT v. Dr. T.K. Dayalu (supra) will have no application and capital gain arises only in AY 2008-09 and not in AY 2007-08. This proposition of the ld. AR is totally misconceived. 65. The existence of a consideration is essence of the contract. In the present case, the land owner i.e. the assessee will get 1,48,333 sq.ft. area in the said complex to be constructed on the schedule property which includes proportionate common areas and amenities along with 1 covered car parking slot for every 1000 sq.ft. of super built up area in the said complex along with the right to retain the ownership of the proportionate share / undivided share, right, title, interest in the land in the schedule property. In addition to this, the assessee has to receive as per clause 8 of the JDA a sum of Rs. 35 crores as a refundable security deposit. Out of this, the assessee received Rs. 15 crores before 30.3.2007. As per clause 8(2) of the JDA, the balance Rs. 20 crores to be received is, Rs. 10 crores on or before 15.5.2007 and Rs. 10 crores on....
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....he OWNER shall execute a registered irrevocable Power of Attorney interalia empowering the DEVELOPER to alienate, sell, convey and lease the "DEVELOPERS CONSTRUCTED AREA" and OWNERS CONSTRUCTED AREA jar enabling the development of the land in the Schedule property and to obtain clearance, permissions, sanctions from the Income Tax Department whenever necessary ..... ". 69. It is abundantly clear therefore that, the rights of possession have been alienated to IDEB in letter and spirit. The contentions of the assessee in this regard are therefore not tenable with regard to transfer of possession. Apart from disputing the year of taxability in respect of the impugned transaction, it is not the assessee's case that the agreements dated 30/03/2007 with IDEB were not enforced or continued in the subsequent years. It is also not the assessee's contention that the aforecited agreements were either cancelled or that the deposits received from IDEB were refunded at a later date. Therefore the transaction of sale / JDA with IDEB remained intact, without the assessee having duly declared the transactions as liable to capital gains. The AO in this regard has recorded in para 8.5.5 of....
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....ideration. 72. In this case, JDA has been registered and assessee has given Power of Attorney on 30.3.2007. As per Power of Attorney also, the assessee has given the right to the developer to execute agreement or sale deeds or other conveyance in respect of schedule property and to do all acts, deeds and things with the said developer as considered necessary or any other manner as deemed fit so as to fully and effectually convey the same. This issue is also covered against the assessee by the judgment of the Hon'ble Supreme Court in the case of CIT v. Balbir Singh Maini, 391 ITR 531 (SC) as JDA & POA has been registered and reading of these registered documents show that the present assessee being owner of the land has parted with ownership of land to the developer and developer has the right to develop, alienate, sale, convey and transfer the constructed area and there is valid transfer of rights by the landlord to the developer.By the same GPA, the assessee has also given right to the developer to sell upto 115000 sq.ft. built up area of the assessee's share of constructed area also. Thus, he has given the bundle of rights through GPA in favour of the developer including right....