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2015 (7) TMI 482 - KARNATAKA HIGH COURTComputation of capital gain - Whether the Tribunal was correct in holding that the amount received by the assessee from L & T, the developer of the adjoining land in respect of the transfer of 7575.37 square meters of FAR in assessee's residential plot measuring 1.6 acres is not transferable as the same is not a capital asset and consequently no capital gains can be levied? - Held that:- The search came to be conducted on 4.2.2004 wherein number of vital documents were found against the assessee and L & T. Even thereafter a letter dated 7.6.2005 came to be written to the assessee (wherein they have enclosed a letter dated 23.9.1999) confirming the terms on which the amount in respect of the FAR surrendered to be paid. It is clearly mentioned in the said letter that the available approved FAR area is for 35 acres 6 guntas though the joint development agreement dated 19.10.1995 was only in respect of 34 acres of land. It is also mentioned in the said letter that the FAR area accrued on the balance area of 1 acre 6 guntas will be shared between the L & T and assessee as per the ratio defined in the joint development agreement dated 19.10.1995, which clearly means that the assessee is entitled to 25% of the profit earned by utilizing 7575.37 square meters of FAR relatable to 1 acre 6 guntas of land. However, curiously another letter came to be issued by the L & T on 4.7.2005 mentioning that the amount of ₹ 3.15 crores paid to the assessee is in the nature of advance. Such letter is clearly an after thought inasmuch as, the search was made in the year 2004 and this self-serving letter written by the L & T to protect the assessee from tax liability by any stretch of imagination cannot be said to be reliable. Thus, the explanation of the L & T deserves to be rejected as the same is after thought. We concur with the opinion expressed by the Assessing Officer and Appellate Commissioner that the assessee has surrendered FAR to an extent of 7575.37 square meters in respect of 1 acre 6 guntas exclusively held by him in favour of the L & T and has earned ₹ 3.15 crores as advance in that regard. We have already clarified that surrendering of the said FAR by the assessee in favour of the L & T amounts to transfer within the definition of Section 2(47) of the Act. All these aspects are considered in detail by the Appellate Commissioner as well as the Assessing Officer. ITAT is not justified in concluding that there is no transfer of FAR relating to 1 acre 6 guntas during the relevant year. The Appellate Tribunal is also not justified in holding that no income has accrued during the year as no construction has taken place relating to such FAR. The reasons assigned by the Income Tax Appellate Tribunal while setting aside the orders passed by the Assessing Officer and the Appellate Commissioner cannot be accepted - Decided in favour of the Revenue.
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