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2014 (5) TMI 743 - ITAT MUMBAIBusiness income treated as STCG – Profit from sale of constructed area/allotted flats – Held that:- CIT(A) was rightly of the view that the constructed area/allotted flats received by the assessee as consideration from the developer against transfer of its immovable property were in the nature of capital assets and the profit arising from the sale thereof was chargeable to tax in the hands of assessee as capital gain and not business income - the assessee has also not been able to put forth any contention or material to show that the surrender of constructed area /allotted flats to the developers constituted business activity of the assessee – the order of the CIT(A) is upheld – Decided against Assessee. Deduction of various expenses – Held that:- The deduction on account of expenses incurred by the assessee on cost of improvement of the assets sold or in connection with the transfer of capital assets only can be allowed - assessee has contended that some of the expenses claimed by the assessee are falling in this category – thus, the matter is remitted back to the AO for verification of the claim – Decided in favour of Assessee. Amount added on account of security deposits adjusted - Surrender of constructed area /allotted flats to the builder – Held that:- CIT(A) himself took note of the fact that the security deposit was received by assessee in lieu of 1950 sq. ft. area – he overlooked the fact that the amount of security deposit received by the assessee was adjusted against the sale consideration receivable against the area of 5270 sq.ftl including the area of 1950 sq. ft surrendered during the year under consideration and what the assessee actually received was only Rs.49,86,500 - The assessee thus had not received the amount of security deposit over and above constructed area of 8635 sq ft. and since the said security deposit was adjusted against the area of 1950 surrendered by the assessee, the consideration received by the assessee was only to the extent of 8435 sq. ft built up area, the value of which was already declared by the assessee while computing the LTCG arising from the sale of land - the addition made by CIT(A) by way of enhancement is not sustainable – Decided in favour of Assessee. Enhancement of amount – Held that:- CIT(A) observed that security deposit of Rs.25,00,000 was received by assessee from the developer as per the development agreement on the condition that the assessee would have an option to adjust the same by surrendering the constructed area of 1950 sq.ft. allotted to it - The rate for surrendering the area of 1950 sq. ft in the case of adjustment of security deposit thus was fixed at the time of execution of development agreement and there was no case of making any enhancement on the part of CIT(A) by adopting the higher rate at which other constructed areas was surrendered by the assessee to the developer – thus, the addition made by the CIT(A) is set aside – Decided in favour of Assessee.
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