9911796707
TMI Blog2012 (7) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 143(3) of the Income tax Act. The dispute raised is regarding accrual of income from sale of land as per development agreement. The assessee was engaged in the business of development and construction of land in the village Yerwada, in Pune Dist. The assessee was following mercantile system of accounting and was following policy of declaring income from the development project from year to year on the basis of 25% of the WIP of the project. A trust named as Mukund Bhavan Trust had acquired interest in 326 acres of land in village Yerwada. The trust was facing difficulty in release of land from Government of Maharashtra. The trust entered into an MOU with the promoters of the assessee company as per which the promoters were required to make efforts for release of the land from the Government and assessee was to be given development rights in the land to a certain extent for agreed consideration. Because of the efforts made by the promoters of the assessee company, land admeasuring 108 acres and 26 gunthas was released in which the assessee was given development rights to the extent of 32% on payment of consideration @ Rs.50 per sq.ft. in addition to the earnest money deposit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnment should be computed on the same basis as in the case of the entire project. Accordingly it was argued that income offered by the assessee, @ 25%, the basis adopted by the assessee for offering income from the project had to be accepted. Alternatively it was also submitted that the assessee should be allowed proportionate cost of land for acquiring joint right, title and interest in the land. CIT(A) however did not accept the contentions of the assessee that assignment of development rights was integral part of the single individual project. The transfer of part of development right was independent of the land being developed by the assessee. He also noted from the agreement that the assessee jointly with the trust was required to convey land to the proposed buyers of the developed property and in fact possession of the land had been given to Mahanagar Construction. The agreement also provided that the developer was entitled to demarcate or amalgamate the said land with other property if so desired. The assessee jointly with the trust had handed over possession of the land along with development rights against which part consideration had been received and therefore, the trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the development rights were granted or income should be assessed @ 25% as done by the assessee in case of the development project. 5.1 The case of the assessee is that granting of development rights was an integral part of development project which was one indivisible project and therefore, the income had to be assessed @ 25% as part of the development project. We, are however unable to accept the claim made by the assessee. The assessee had development rights in respect of certain piece of land. The assessee instead of developing the land, transferred the development rights in respect of part of the land to a separate construction company. As per the agreement, the assessee jointly with the trust was required to convey the land to the proposed buyers and possession of the land had also been given during the year along with development rights. Thus instead of developing land, the assessee parted with the development rights in respect of part of the land forever. This was an independent activity having no connection with the development of the remaining part of the land. The assessee was following mercantile system of accounting as per which income accrues when it becomes due for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so the dispute raised is identical to the dispute in appeal No.402/M/2008 with the only difference that assessment in these years had been made under section 143(3) r.w.s. 153A subsequent to the search conducted in case of the assessee on 22.3.2007. In these years also the assessee had received certain consideration in respect of part transfer of the development rights. In assessment year 2004-05, the assessee as per development agreement dated 27.1.2004 with M/s. Mahanagar Construction was entitled to received Rs.2.52 crores. The income as per this agreement had already been considered in the original assessment which was subject matter of appeal in ITA No.402/M/2008. However, after search, the assessment had been reopened and fresh assessment had been made under the provisions of sec.153A in which the AO again assessed the entire income from the transfer of development rights. 6.1 In assessment year 2005-06, the assessee had further transferred development rights as per two agreements entered into with M/s. Mahanagar Construction and M/s. Mahanagar Developers in respect of some other portion of the land as per which sums of Rs.81,28,000/- and Rs.2,99,52,000/- respectively were r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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