TaxTMI 
TaxTMI 
2023 (3) TMI 849
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.... erred in ignoring the fact that the consideration was also received by the firm beg the owner of transferred asset and hence the profit therefrom was rightly assessed in the hands of assessee firm by the AO. 4. CIT(A) erred in giving evidentiary Value to the MOU dated 08.10.2009 even though it is not registered. 5. CIT(A) erred in holding that since AO accepted the transfer through MOU dated 20.11.2008 as genuine, he ought to have accepted the transfer through MOU dated 08.10.2009 also. CIT(A) ought to have noted that sales though MOU dated 20.11.2008 is supported by declaration of such sales contemporaneously before the service tax authorities whereas there is no such evidence in support of the alleged MOU dated 08.10.2009 and such transaction not disclosed for service tax purpose; the facts are not identical. 6. CIT(A) erred in holding that attachment of property by I.T. Department is a reason for non-payment of service tax. He ought to have noted that according to assessee, transfer took place by way of MOU dated 08.10.2009 whereas attachment by I.T. Department is much later ie. on 24.12.200 and hence assessee ought to have paid service tax, of which liability....
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....re is no question of making any addition. The AO, after considering relevant submissions of the assessee and also taken note of certain facts observed that, the assessee could not substantiate transfer of 20 flats measuring 24,648 sq.ft. to its partners and corresponding income offered to tax in the hands of the firm. Further, in absence of corroborative evidence to support MOU dated 08.10.2009 coupled with the fact that the asset in the form of stock in trade was reflected in the financials of the firm up to assessment year 2013-14, the contentions of the assessee cannot be acceded and thus, sale value of 20 flats has been assessed in the hands of the firm. The relevant findings of the AO are as under: The submissions made by the assessee are carefully considered. The first unregistered MOU dated 20/11/2008 by which 26 flats measuring 30,313 Sq. feet is transferred by the firm to its partners is supported by corroborative evidence in the form of payment of service tax. The service tax is paid by the firm on account of transfer of 26 flats to partners of firm who happens to be the family members. But the fact of the matter is the second unregistered MOU dated 8/10/2009 by ....
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....(A) by following the decision of ITAT, 'B' Bench in assessee's own case for assessment years 2007-08 to 2009-10 in ITA Nos. 1644 to 1647/Mds/2012, observed that the assessee is eligible for deduction u/s. 80IB(10) of the Act, in respect of profit derived from housing project and thus, directed the AO to allow the benefit of exemption claimed u/s. 80IB(10) of the Act. The relevant findings of the CIT(A) are as under: "4.1.3 I have considered the contents of the assessment order and the submissions of the assessee firm carefully. There are two sets of transfer of flats by the firm to its partners, one in November 2008 of 26 flats measuring 30,313 sq.ft, vide MOU dated 20.11.2008; and the second one in October 2009 of 20 flats measuring 24,648 sq.ft, vide MOU dated 08.10.2009. The AO has accepted the transfer of the first batch of 26 flats, as a genuine one, solely on the ground that it was supported by the corroborative evidence of payment of service tax. However, the AO has treated the transfer of the second batch of 20 flats as nongenuine, only on the ground that it was not supported by the corroborative evidences like payment of service tax. 4.1.4 As explained by....
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....n here that when the assessee (firm) is eligible for 100% deduction u/s.801B(10) of the Act, which was also allowed by the Hon'ble ITAT as early as 2012, there was no need for the assessee for any tax planning, that too when the partners are not exempt from tax. Therefore, it is not possible to presume that the assessee had ulterior motives in designing / transferring the flats to the partners either in 2008 or 2009. Further, when the ITAT decision allowing 100% exemption in the hands of the firm, it is also not possible to presume that the transfer of46 flats (i.e. either the entire 46 flats or the second batch of 20 flats) was an afterthought, to avoid tax in the hands of the firm. In continuation of the same line of thought and principle it is a well known judicial maxim that one cannot make a profit from himself. In a transfer from firm to partners, can the firm make profit from the partners ? Questions of similar nature have arisen in different contexts, but the principle is the same. Can contributors derive profit from contributions made by them, which can only be returned to themselves. Certain tests have been advocated in the decision of Hon'ble Supreme Cou....
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....ine. The AO was not justified in disbelieving the transfer of second batch of 20 flats for the mere reason of non-payment of service tax. Therefore the AO is directed to consider the transfer of al146 flats (i.e. 26 flats transferred on 20. 11.2008and 20 flats transferred on 08.10.2009) as genuine transfers and recompute the business income by excluding the sale proceeds of all46 flats (i.e. 26 flats + 20 flats) claimed as transferred to the partners. This ground of appeal is allowed. 4.2 Claim of exemption u/s.8OIB(10) of the Act: The next issue is regarding the disallowance of assessee's claim of deduction u / s. 80IB(10) of the Act. The assessee firm in its return of income med, claimed 100% deduction of Rs.81,36,667/- u/s.80-IB(10) of the Act, being the profits derived from the housing project. The Assessing Officer, in his assessment order, denied the deduction claimed u/s.80IB(l0) of the Act, on the ground that the assessee 1S a mere !and contributor in the project and hence not eligible for the deduction, This issue is a recurring issue coming from the earlier years, The ITAT 'B' Bench, Chennai, while disposing the appeals of A.Ys.2007-08 to 2009-2010, vide ....
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....section 45(4) of the Act. Therefore, ld. DR submitted that ld. CIT(A) completely erred in holding that transfer of flats in the hands of the firm is not taxable. As regards deduction claimed u/s. 80IB(10) of the Act, the Ld. DR, fairly agreed that the Department has not accepted order passed by the Tribunal and has preferred further appeal before the Hon'ble High Court of Madras, which is pending for adjudication and thus, the issue may be decided in accordance with law. 7. The Ld. Counsel for the assessee, on the other side supporting the order of the CIT(A), submitted that there is no dispute with regard to the fact that the assessee has transferred 20 flats to its partners at book value without there being any profit and thus, even assuming for a moment, profit from transfer of flats should be assessed in the hands of the firm, but in reality there is no profit from the transactions. He further submitted that, the assessee has explained the reasons for not considering transfer of flats to its partners as sales, and said transfer has been explained with necessary evidences. The CIT(A), after considering relevant facts has rightly deleted additions made by the AO and their orde....
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....he benefit of exemption u/s. 80IB(10) of the Act. Admittedly, the assessee is claiming deduction u/s. 80IB(10) of the Act, towards entire profit derived from housing project. Although, the AO has denied benefit of deduction u/s. 80IB(10) of the Act right from beginning, but co-ordinate bench of ITAT in assessee's own case for assessment years 2007-08 to 2009-10 in ITA Nos. 1644 to 1647/Mds/2012 had considered an identical issue and held that the assessee is eligible for deduction u/s. 80IB(10) of the Act, in respect of 100% profit derived from housing project. The Hon'ble Jurisdictional High Court of Madras in TCA Nos. 387 to 394 of 2013 dated 17.03.2021, has upheld the findings of the Tribunal in allowing the benefit of deduction u/s. 80IB(10) of the Act towards profit derived from housing project. From the above, it is clear that the assessee is eligible for 100% deduction towards profit derived from housing project u/s. 80IB(10) of the Act. In light of above fact, if you examine transfer of 20 flats by way of MOU dated 08.10.2009 to partners, and taxability of profit from said transfer in the hands of the firm, no doubt transfer of 20 flats to partners by way of MOU should be tr....