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2019 (10) TMI 469 - AT - Income TaxDisallowance of deduction claimed u/s 80-IB(10) - claim of the assessee rejected on the ground that the profit on sale of the land was suppressed - AO as well as the CIT(Appeals) found that the market value of the land was fixed at a very lower rate since the children of the owners of the land were partners in the assessee-firm - HELD THAT:- It is an admitted fact that the assessee-partnership firm is maintaining books of account. No defect was pointed out either by the AO or by the CIT(Appeals) in the books maintained in the regular course of business activity. AO found that the cost of the land which was said to be taken from Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran for joint development by the assessee-partnership firm was valued at guideline value. The market value was not paid to Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran. It is a well settled principle of law that market value of the land is not a constant or fixed price. It may fluctuate depending upon various factors such as area of the land, location of the land, infrastructure facility available around the land, access to the public road, etc. The State Registration Department, after considering all these facts, fixed the value which is known as guideline value to guide the Sub- Registrar to determine the market value. The guideline value may not always reflect the market value. Sometimes, the guideline value may be less or it may be more depending upon the area and location of the property. When the assessee entered into a joint development agreement for transfer of part of the land to the partnership firm at a particular price, this cannot be said that the value determined for transfer of part of land or the entire land is a device to increase the profit of the assessee-firm. AO as well as the CIT(Appeals) found that the market value of the land was fixed at a very lower rate since the children of the owners of the land were partners in the assessee-firm. There may be a justification for making allegation like this when the children of the land owners alone are partners. In this case, apart from the children of the owners, there are other partners who are not related to the land owners at all. The other partners may not cooperate with the land owners to purchase the land or to take the land on joint development so as to reduce the profit of the firm. Moreover, the land owners also may not transfer the land for a price less than the market value since the third party partners who are in the assessee-firm indirectly get the benefit. When the third party individuals are partners in the assessee-firm apart from the children of the land owners, this Tribunal is of the considered opinion that the contention of the Revenue that the land in question was transferred to the partnership firm at a guideline value in order to increase the profit of the assessee-firm so as to claim deduction u/s 80-IB(10) has no merit at all. Moreover, the contention of the Ld. D.R. that the land was transferred at the guideline value so as to shift the profit to the partnership firm is not supported by any material. Profit is more than 50% - As observed earlier, the assessee is maintaining books of account in the regular course of business activity and the land was taken by way of joint development agreement and the Revenue authorities have not doubted the books of account maintained in the regular course of business. When the book result discloses the profit at 50%, the Revenue cannot doubt that the profit was exorbitant or improbable one. The profit generated by the assessee-firm is supported by the books of account maintained in the regular course of business activity, therefore, the Revenue authorities have no justification to doubt the percentage of profit. Children of the land owners, namely, Shri Prem Chandrasekaran and Shri Akil Chandrasekaran are partners in the firm with 35% of stake. Therefore, naturally they are eligible for 35% of the profit of the firm. 65% of the profit would go to the other partners who are not in any way related to the land owners, namely, Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran. The land owners may not prefer to give 65% of the shares to the third parties who are not connected with them. In such circumstances, this Tribunal is of the considered opinion that there is no arrangement as projected by the Ld. D.R. to shift the profit to the partnership firm so as to claim a higher rate of deduction under Section 80-IB(10) of the Act. This Tribunal is unable to uphold the orders of the lower authorities. Accordingly, the orders of both the authorities below are set aside and the Assessing Officer is directed to allow deduction under Section 80-IB(10) of the Act as claimed.- Decided in favour of assessee.
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