TaxTMI 
TaxTMI 
2026 (7) TMI 392
X X X X Extracts X X X X
X X X X Extracts X X X X
....ire were issued and served on the assessee in response to which the assessee filed his response. 3. During the course of assessment proceedings the Assessing Officer noted that the assessee has received an amount of Rs. 33,00,00,000/- as sale consideration for immovable property. The value of the property as per the stamp valuation authority was declared at Rs. 15,18,86,616/ -. He noted that the assessee has claimed deduction under section 48 of the Act for the indexed cost of acquisition of Rs. 32,44,30,676/- wherein the cost of acquisition was declared at Rs. 9,80,15,310/ -. Further, the assessee claimed deduction under section 54F amounting to Rs. 14,47,358/ -. The assessee accordingly declared long term capital gains of Rs. 41,21,966/ -. 4. The Assessing Officer, on perusal of the sale deed, noted that the conveyance deed of Rs. 83,36,27,000/- in respect of area admeasuring 01 hectare, 39.675 acres i.e. 13967.500 sq. mtrs. out of survey No. 230A/2, admeasuring 01 hectare i.e. 17800 sq. mtrs. situated at village Lohegaon, Haveli Taluka, Pune was entered between the vendors M/s Lunkad Reality (partners Shri Amit Kantilal Lunkad & Shri Amol Kantilal Lunkad) and the Purchaser....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt order dated 19.03.2025, the grounds of appeal and equally detailed submissions made by the appellant on various dates. After considering the facts and the circumstances involved in the case, my observations and findings are discussed as follows: 5.1. (i). At the outset, it would be pertinent to place on records that the case involves background and events pertaining to as old as year 1988, if not year 1931. The Assessing Officer has dealt with all the intricate issues in detail on pages 6 to 18 of the assessment order. The issues range from the head of income to determination of the cost of acquisition and apportionment thereof. The initial dispute w.r.t. the head of income was resolved at the assessment stage itself and the Assessing Officer assessed the income under the head "Capital Gain" instead of "Income from Other Sources" against initial proposal. Two other points of dispute could not be agreed upon and hence, remained unsettled at the assessment stage, leading to the significant amount of addition in the returned income of the appellant. I will be taking up these points of dispute in the succeeding paragraphs. (ii). Before we deal with these two points....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed between Balgude Family and the appellant, it was noted that the entire consideration pertaining to the Said land was paid by the appellant in the form of cash paid through banking channels, as already discussed above, vide para 5.2 of this order, and not in the form of share in the proposed project, or otherwise. It has been further placed on record that even the possession of the said property was handed over to the appellant by Balgude family on the same date, i.e. the date of registration of Development Agreement and further, irrevocable Power of Attorney was also registered in favor of the appellant by the Balgude family. (ii). In the said Development Agreement, it was committed by the Balgude family to the appellant that the former will be bound to register sale deed in favor of the appellant or in name of any person designated by the appellant. But in later stage when Balgude family received the entire payment and in the due course when the Urban Land Ceiling Act was abolished, it tried to litigate the property and went into the court for getting possession of the said land back. Further, it was placed on record that the case was litigated at the level of Civil Co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orizes the sale of the portion of the said land admeasuring 13,967.50 square meters, as discussed above. Clause (h) specifically mentions that pending litigations shall be withdrawn by the appellant and earlier awards shall be nullified. Similarly, the Conveyance deed has been signed by the Lunkad family represented by M/s Lunkad Realty, Mr Amit Lunkad and Mr Amol Kantilal Lunkad as vendors and High Spot Realtors LLP as purchaser, and the appellant as the confirming party. The deed has witnessed in Rs. 83,36,27,000/- out of which Rs. 33,00,00,000/- have been paid to the appellant as recorded in the Consideration part, as available on page 13 of the said Deed. 5.4.(i). As already noted and recorded above, the land survey number 230A/2 was bifurcated in two parts but the appellant has consistently claimed to have relinquished the rights and interests, vested in the entire land and not merely in a part of it. The AO however, holds vide para no. 3.4 and 3.5 of the assessment order, that the said property admeasuring 13,967.50 sq. meters was sold for a sale consideration of Rs. 83,36,27,000/- wherein the appellant was given Rs. 33,00,00,000/- to surrender his rights in the prop....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ke of easier understanding and records, the same is reproduced as follows: "A. The Vendor and Confirming Party herein state that, all that property bearing Survey No. 230 A/2 admeasuring 08 Acre 32. Gunthas i.e. 03 Hectare 56 Ares., situated at Village Lohegaon within the Registration District Pune, Sub-Registration District Haveli, Taluka - Haveli arid within the limits of Pune Municipal Corporation is hereinafter referred as Said Larger Land, was owned & possessed by Tukaram Genu Devkar and who gifted the same to his two grandsons viz, Eknath Ganpat Balgude and Balkrishna Ganpat Balgude by Gift Deed dated 14/11/1931 registered in the office of Sub- Registrar Haveli No, 1 at Serial No. 2606/1931" (page 74 of paper book). "B. The confirming party claims that, it has by development agreement dated 10/04/1989 obtained development rights of the Said Larger Land from the Balgude family. The confirming party further claims that in pursuance of the aforesaid transaction, the Land Owners transferred the possession of the said Larger Land to the confirming Party for the development purpose by executing possession receipt dated 10/04/1989. The Confirming Party claims that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e it sufficiently clear that the confirming party i.e. the appellant, has relinquished his rights in property bearing survey number 230A/2 (admeasuring 08 Acre 32 gunthas i.e. 03 Hectare 56 Acres, situated at village Lohegaon within the Registration District Pune, Sub-Registration District Haveli, Taluka- Haveli within the limits of Pune Municipal Corporation, as mentioned in the second line of the clause A and not in survey number 230A/2 (Eastern portion) or survey number 230A/2/1, 230A/2/1, 230A/2/1/3 (Western portion). Clause H of the Conveyance Deed as well as various clauses of the Consent Terms stipulate receiving only Rs. 33,00,00,000/- in lieu of the same by the Appellant. Mis-appreciation of facts on the part of the AO has probably occurred due to placing reliance on merely some selected paragraphs of these documents, decoupled with the others. 6.3. (i). An isolated reading of clause (a) of the Consent Term dated 03.08.2021 gives a construction that interests and rights in part of property admeasuring only 13,967.50 sq. meters have been relinquished but conjoint reading from clause (a) to clause (g) of the Consent Term dated 03.08.2021 along with clauses A to D of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stern part). In this regard, the appellant has consistently denied receiving any other benefits beyond Rs. 33 crores for any part of the 'Larger Land' i.e. Survey no. 230A/2 that has presently been renumbered in various parts, as already recorded in preceding paragraphs. 7. In view of the detailed discussions and findings recorded above, I am of the considered opinion that the conclusions drawn by the AO w.r.t. both the issues i.e. the issue of restricting the cost of acquisition assuming that the rights have been surrendered w.r.t. only one part of the property and on top of that, restricting the indexed cost of acquisition to a co-efficient of 0.396 instead of 1, are unsustainable on facts and in law. While the first dispute emanates from the mis-appreciation of the intricate facts, or at best hinges on disjointed reading of the documents presented before him/her, the second dispute, though largely predicated upon the first one, comes into play due to mis-application of mathematical principles in the facts and circumstances of the case. Accordingly, in view of the same, I am constrained to hold that the conclusions drawn by the AO on page 17 of the assessment ord....
X X X X Extracts X X X X
X X X X Extracts X X X X
....part land admeasuring 13967.50 sq. mtr. sold to the Hotspot Realtors LLP by the vendor Lunkad Realty. 3. The Ld. CIT(A) has erred in allowing indexed cost of acquisition of Rs. 32.44 cr. holding that the assessee has received Rs. 33 crs. for waiver of interest/right for the entire larger land of 35,600 sq. mtr. whereas as per para 10(a) of the consent term dated 4.08.2021, in which the assessee is plaintiff is for the part land admeasuring 13967.50 sq. mtr. only which was later on sold to the Hotspot Realtors LLP by the vendor Lunkad Realty. Also clause 10(g) of the consent term dated 4.08.2021 does not specify that the consent terms are for larger areas of land measuring 35600 sq. mtr. 4. Without prejudice Ld CIT(A) has failed to note that the development agreement signed by assessee with Balguide Family and others in 1989, the assessee has not acquired total rights in the entire area of 35,600 sq. mtr. on payment of Rs. 50,00,0000 because as per clause 8 of agreement 10.04.1989 of the development agreement, the landlord and assessee agreed to distribute the profit share in ratio of their share and allowance of cost of acquisition for entire area of 35,600 sq. mt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ansferred? 4.2 Before we move ahead, it is important to first find out which is the land or asset which has been sold/transferred for which sale consideration of Rs. 83,36,27,000/- was received by the vendor M/s Lunkad Realty. The land which is transferred is land admeasuring 1H 39.675 R out of Survey No. 230A/2 admeasuring 1H 78R situated at Lohegaon, Pune. Originally, this land of 1H 39.675 R (13,967 sq. mtrs) was part of Larger Land admeasuring 3H 56R at Survey No. 230A/2 (35,600 sq. mtrs). This Survey No. 230A/2 was later (around 2011) was divided into two parts Survey No. 230A/2 (also known as Eastern Part) adm. 1H 78R and Survey No. A/2/1 (also known as Western part) admeasuring 1H 78R. It is also pertinent to mention here that PMC had acquired land adm. 3832.50 R out of both Survey No. A/2 and Survey No A/2/1. It is seen that the Eastern part of land adm. 13,967 out of total land a Survey No. A/2 is the subject capital asset which was transferred in this case. M/s Lunkad Realty was to pay the assessee Rs. 31,00,00,000/- as per Consent decree dated 03.08.2021 for relinquishing rights in respect of this land adm. 13,967 out of total land at Survey No A/2 only. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be called as whole and sole owner of the land. Thus, Ld. CIT(A) failed to note that the assessee was not the owner of the land by held only certain rights by virtue of a development agreement dated 10.04.1989. Ld. CIT(A) overlooked the important fact before allowing the assessee cost of acquisition in relation to the larger land (35,600 sq. mtrs) when the assessee was not the sole owner of even the smaller part (13,967 sq. mtrs). The failure of the Ld. CIT(A) to appreciate this crucial fact has resulted in perverse finding that the assessee was entitled to deduct entire cost of acquisition in relation to the larger land (35,600 sq. mtrs) from the full value of consideration received by him in relation to the certain rights (not whole and sole ownership) in the smaller land (13,967) which was actually sold. 4.5 Ld. CIT(A) also failed to appreciate the fact that the development agreement dated 10.04.1989 submitted by the assessee is only in respect of the development rights of the land. In fact, para 8 (page no. 130 of the assessee's paper book) clearly mentions that due to lack of resources the original owners of the land are not able to develop the land and therefore,....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Survey No. 230A/2/1 shall remain with the plaintiff i.e. the assessee. Further, in the last line of para 11(h), it is clearly mentioned that the assessee would be at liberty to enforce his rights against other third parties in respect of the Survey No. A/2/1 and the Lunkad realty will have no objection in this regard. This is completely opposite of what Ld.CIT(A) has concluded in his order. Thus, the finding of CIT(A) is perverse with regard to surrender of rights by the assessee in respect of S. No. 230A/2/1." 8. The Ld. Counsel for the assessee on the other hand while supporting the order of the Ld. CIT(A) / NFAC also filed a detailed written submission. He submitted that the consideration of Rs. 33 crores was received as a lump sum, global settlement for the complete extinguishment and relinquishment of all his rights, title and interest in the entire larger property admeasuring 35,600 sq. mtrs. (Survey No. 230A/2). Consequently the assessee is entitled to the indexed cost of acquisition for the entire 35,600 sq. mtrs. He submitted that this position is conclusively established by an independent and conjoint reading of the foundational documents, the court pleadings, the se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed over to Lunkad Reality. Since the 1989 documents covered the entire 35,600 sq. mtrs., therefore, the possession handed over was of the entire land. Referring to clause (h) of the Consent Terms dated 03.08.2021 he submitted that the said clause explicitly cancels the 2005 JV agreement (and its supplementary agreements) pertaining to the Western portion (renumbered as Survey No. 230A/2/1). It nullifies the related arbitral award. He submitted that the conveyance deed dated 18.10.2022 fortifies the fact. Thus, there is no separate consideration provided in the Consent Terms for the cancellation of the assessee's rights in the western portion. He submitted that the amount of Rs. 33 cores received by the assessee is the single, consolidated consideration for the assessee exiting the entire property i.e. both the eastern and western portions. 12. Referring to the Conveyance Deed dated 18.10.2022 he drew the attention of the Bench to various clauses and submitted that the said conveyance deed expressly records surrender of the larger land. He submitted that while the conveyance deed was executed to transfer the title of the eastern portion (13,967.50 sq. mtrs.) to a third party ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rs. 33 crores to be the final settlement for the assessee's complete exit from the entire 35,600 sq. mtrs. He accordingly submitted that the Revenue has artificially bifurcated a composite settlement. The consideration of Rs. 33 crores received by the assessee was the price for his total exit from all rights, claims and interests across the entire Survey No. 230A/2 derived originally from 1989 development agreement. The assessee has completely moved out of the land. Therefore, the assessee is fully justified in law to claim the indexed cost of acquisition for the entire 35,600 sq. mtrs. and the Assessing Officer's proportionate restriction is based on a misreading of the transaction. He accordingly submitted that since the Ld. CIT(A) / NFAC has deleted the addition by appreciating the facts properly, therefore, the grounds raised by the Revenue be dismissed. 14. He submitted that the documents must be read as a whole and not in isolation to avoid misinterpretation of the facts. He submitted that u/s. 2(14) of the Act, "property of any kind" includes actionable claims, development rights and possessory rights. So far as the substantive rights over the entire 35,600 sq. mt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erstanding of what it believe are the true rights of the consenting parties. He submitted that the assessee has not acted upon or raised legal claims when part of the western portion of land was sold by Ramsar Builders. The understanding is clear because the assessee is no longer holding any rights or interest in respect of the entire larger land of 35,600 sq. mts. Further, the Revenue's assumption that Lunkad Realty was only interested in clear encumbrances over the eastern portion is factually incorrect and ignores the history of the transaction. He accordingly submitted that the order of the Ld. CIT(A) be upheld and the appeal filed by the Revenue be dismissed. 16. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case made addition of Rs. 20,28,10,757/- under the head 'long term capital gain' out of the total amount of Rs. 33 crores received by the assessee by restricting the indexed cost of acquisition. According to the Assessing Of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ugh various agreements and the assessee was merely a confirming party. Therefore, the Ld. CIT(A) / NFAC was not justified in allowing the assessee's indexed cost of acquisition in relation to the larger land. It is also his submission that the development agreement dated 10.04.1989 submitted by the assessee is only in respect of the development rights of the land. Therefore, allowing the assessee complete deduction of cost of acquisition even in respect of smaller part may result in absurd situation wherein the vendor i.e. Lunkad Realty would also claim complete deduction of cost of acquisition in respect of smaller part i.e. 13967.5 sq. mtrs. It is the argument of the Ld. CIT-DR that the Ld. CIT(A) / NFAC completely failed to appreciate the importance of consent decree dated 04.08.2021 wherein para 11(a) clearly mentions that the assessee is surrendering his all rights, title and interest in S. No. A/2 admeasuring 13967.5 sq. mtrs. in lieu of payment of Rs. 33 crores. It does not mention the rights in larger land admeasuring 35,600 sq. mtrs. It is his submission that the Ld. CIT(A) / NFAC without considering various terms and conditions of the consent decree and the developmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... him, the Assessing Officer's proportionate restriction is based on a misreading of the transaction. It is also his submission that the Ld. CIT-DR cannot travel beyond the factual findings given by the Assessing Officer. 19. We find sufficient force in the above arguments of the Ld. Counsel for the assessee. There is no dispute to the fact that what was sold by M/s. Lunkad Reality to M/s. Highspot Realtors LLP was land admeasuring 13,975 sq. mtrs. The fundamental error in the Revenue's approach in our opinion is not appreciating the fact that what the assessee has surrendered is his right, title and interest in the entire land parcel admeasuring 35,600 sq. mtrs. documented in various clauses of the conveyance deed dated 18-10-2022. We find clause 'A' of the conveyance deed read as under: "A. The Vendor and Confirming Party herein state that, all that property bearing Survey No. 230 A/2 admeasuring 08 Acre 32 Gunthas i.e. 03 Hectare 56 Ares, situated at Village Lohegaon within the Registration District Pune, Sub- Registration District Haveli, Taluka Haveli and within the limits of Pune Municipal Corporation is hereinafter referred as 'Said Larger Land....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee transferred rights only in land admeasuring 13,967.5 sq. mtrs. in our opinion is contrary to the documentary evidence on record. 22. We find merit in the argument of the Ld. Counsel for the assessee that the Assessee's rights stemmed from the Development Agreement dated 10.04.1989, which unequivocally covered the entire 35,600 sq. mtrs. The Civil Suit (SCS No. 408/2013) instituted by the Assessee was for the specific performance of this 1989 Agreement in its entirety, covering the whole 35,600 sq. mtrs., and the alternative claim for damages (112.50 Crores) was calculated on the developable potential of the entire land. A conjoint reading of the Consent Terms dated 03.08.2021 and the Conveyance Deed dated 18.10.2022 clearly establishes that the assessee relinquished all his rights in the entire land parcel admeasuring 35,600 sq. mtrs., and not merely a portion thereof. In our opinion, the Rs.33 crores received by the Assessee was a lump-sum, global settlement for extinguishing his entire bundle of rights, claims, and litigation across the whole 35,600 sq. mtrs. The Assessee exited the entire project, and therefore, the cost of acquisition referable to his rights in the en....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... respect of the western part. This evidences that all rights of the Assessee in the western part beside the eastern part stood extinguished. For clarification, we reproduce clause 'D' of the conveyance deed which reads as under: "D. The Vendor and Confirming Party entered into a Joint Venture Agreement dated 09/11/2005 registered in the office of Sub-Registrar Haveli No. 7 at Serial No. 1540/2006 for development of area admeasuring 1,50,000 sq. ft out of the Said Larger Land and which Joint Venture Agreement dated 09/11/2005 is duly cancelled as stated in Para H hereunder written." 26. Further clause H of the Conveyance Deed categorically provides that the Assessee has surrendered and relinquished all rights and possession in respect of the Said Larger Land in consideration of Rs.33 crore. The language of this clause leaves no ambiguity that the consideration was for the extinguishment of rights in the entire land parcel and not a part thereof. For more clarity, we reproduce clause 'H' of the conveyance deed which reads as under: "H. The Confirming Party is claiming that, it has rights, title and interest in the Said Larger Land and filed SCS No....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s the argument of the Revenue that only absolute ownership of physical land constitutes a "capital asset" in our opinion proceeds on the legally flawed premise. Under section 2(14) of the Act, "property of any kind" includes actionable claims, development rights, and possessory rights. The Assessee's substantive rights over the entire 35,600 sq. mtrs. were judicially recognized and confirmed by the Civil Court vide order dated 30.06.2003, which has attained finality. We find the 2013 Civil Suit (SCS No. 408/2013) was instituted for the specific performance of the 1989 Agreement for the entire 35,600 sq. mtrs., and the alternative claim for damages (112.50 Crores) was calculated on the developable potential of the whole land. 29. We further find, the assessee in the instant case has not claimed the cost of the physical land. The Assessee determined the Fair Market Value (FMV) of his intangible rights (derived from the 1989 Agreement and Possession Receipt) as of 01.04.2001, and computed the indexed cost on that value. Therefore, the Ld. CIR-DR's argument of an "absurd situation" or double deduction in our opinion is entirely baseless. Lunkad Realty will claim the cost of ....