TaxTMI 
TaxTMI 
2024 (11) TMI 1603
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.... the AO, the assessee filed their reply along with the required documents but the AO estimated the long term capital gain by disallowing the cost of improvement on the ground that the same are not capital in nature. Similarly, the AO in respect of the other property had arrived the capital gains by taking the area as super built-up area even though as per the occupation certificate issued by the authorities that the assessee has received a lesser area than the super built- up area and estimated capital gains on that basis. The AO also made an addition on account of refundable security deposits paid by the developer to the assessee while entering the Joint Development Agreement as income of the assessee. As against the order of the AO, the assessee filed an appeal before the Ld.CIT(A) by contending that the improvement cost are only a capital expenditure and also contended that the area taken for the purpose of arriving the fair market value in respect of the another property is not correct since it is beyond the occupation certificate granted by the authority. Similarly, the assessee challenged the refundable security deposit since the same are to be returned to the developer. The ....
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....der the fact that the arbitration is under process. c. He has erred in considering the provision made in the books of developer as compensation when there is no sufficient objective evidence to treat the security deposit as compensation. 3) The arbitration process is completed and as per the Arbitration Award dated 01-07-2024 the assessee is liable for a compensation of Rs 1,18,30,789/- and the same will be offered to tax in FY 2024-25. The remaining amount of Rs 6,69,211/- is to be repaid to developer. 4) As the assessee is awarded Rs 1,18,30,789/- as per the Arbitration Award in FY 2024-25, the same will be offered to tax in the Return of Income of AY 2025-26. Therefore, taxing the security deposit in the year when the nature of security deposit was not income is not tenable. Appellant prays for leave to add, modify, delete, or introduce additional Grounds of Appeal at any time before the Appeal is disposed off. Based on these and such other grounds that may be adduced from time to time, the Appellant requests the Honourable Income Tax Appellate Tribunal to consider the petition in the light of principles of justice and cancel the addi....
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....ubmitted that the refundable security deposit is finally arrived as income and therefore the order of the AO is correct and prayed to dismiss the appeal. 8. We have heard the arguments of both sides and perused the materials available on record. 9. We have also perused the arbitration award dated 01/07/2024 which is extracted as below: ARBITRATION AWARD In the matter of arbitration between Mr. Govindappa Jayaram [HUF] ("Landowner") and APG Property Services Pvt Ltd ("Developer"), regarding disputes arising out of the Joint Development Agreement dated 07.07.2017, and subsequent Sharing Agreement dated 5/10/2018 relating to the development of a commercial office space at No 30, Crescent Road, Bangalore-560001, the Arbitral Tribunal duly constituted under the Arbitration and Conciliation Act, 1996, and appointed by mutually by the parties, renders the following award: Background: 1. The parties entered into a Joint Development Agreement on 07.07.2017 and subsequent Sharing Agreement dated 5/10/2018, for the development of a commercial office space at No 30, Crescent Road, Bangalore-560001 2. Disputes arose primarily concerning short fall in....
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....fair and reasonable compensation of Rs. 1,18,30,789 (Rupees One crores eighteen lacs thirty thousand seven hundred eighty nine only) shall be payable to the Landowner. Hence, the Landowner shall retain Rs 1,18,30,789 (Rupees One crores eighteen lacs thirty thousand seven hundred eighty nine only) from the refundable security deposit of 1,25,00,000/- (Rupees One Crore Twenty Five Lakhs) paid by the Developer at the time of executing the Joint Development Agreement and refund the remaining refundable deposit of Rs 6,69,211(Rupees six lacs sixty nine thousand two hundred eleven only) to the Developer. It's also agreed between the parties that the refundable deposit held by the Landowner does not bear any interest payable. 3. With retaining of security deposit of Rs. 1,18,30,789 (Rupees One crores eighteen lacs thirty thousand seven hundred eighty nine only) by the Landowner the shortfall in built up area and the carpark is compensated 4. Both parties shall bear their respective costs incurred in relation to this arbitration. Date: 1^st July 2024 Place: Bengaluru 10. From the above said award, we came to know that as against the security depos....
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....n to the explanations offered by the assessee before the AO as well as before the Ld.CIT(A) and contended that all the bills were made for the improvement of the property and therefore they are only capital in nature and only when the improvements are made on the property, the property would fetch more amount at the time of sale. Similarly, the Ld.AR submitted the guideline value taken for calculating the sale consideration is correct and also as per the area shown in the occupation certificate and therefore prayed to dismiss the appeal filed by the revenue before this Tribunal. 15. We have heard the arguments by both sides and perused the materials available on record. 16. The AO in his order, which discussed the issue in detail and accepted that the same are expenditure incurred on the property but declined to take the same as capital expenditure for the reason that they are all small works done on the request of the buyers or tenants. 17. We have perused the reasoning given by the AO and also considered the fact that even though these are all amounts spent for the interior works, without doing such interior work, the property would not fetch more value. It is the normal....
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....occupancy certificate. We feel that there is no logic in taking the area more than the area allotted in the occupancy certificate and the AO merely relied on the procedures under RERA and increased the area of the property by taking the super built-up area even though the assessee had received lesser area as per the occupancy certificate. The AO has no basis to arrive the extra area as against the area allotted under the occupancy certificate. We feel that the assessee had rightly taken into account the area allotted under the occupancy certificate and also correct in taking the value adopted for the property in the 2nd floor for the purpose of arriving the market value of the property. The assessee had arrived the sale value based on some data whereas the AO has no evidence or documents to sustain his estimated sale consideration. Further, the assessee had considered the tolerable limit of 5% as provided in section 50 of the Act and therefore the value has been correctly arrived by the assessee. The AO without having any records, had added 14% on the area offered to tax, only for the reason that in the real estate parlance, the super built-up area of the premises is the saleable a....