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2015 (3) TMI 568 - ITAT MUMBAI

2015 (3) TMI 568 - ITAT MUMBAI - TMI - Compensation paid to prospective buyers for delay in completion of project - CIT(A) deleted the addition - Held that:- So far as it relates to ₹ 7,22,250/- for Compensation paid the relevant clauses which are reproduced earlier are found in the sale agreement. To fulfill obligation of those clauses the assessee has made payment to the buyers. Thus, the payment of this amount cannot be said to gratuitous in nature as held by AO and Ld. CIT(A) has right .....

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the earlier part of this order. Thus, this payment also cannot be said towards penalty or violation of any provision of the Act. It was in the nature of tax. Therefore, we see no infirmity in this deletion and we decline to interfere. - Decided in favour of assessee.

Development charges paid to M/s. R.M. Trust - CIT(A) deleted the addition - Held that:- So far as it relates to disallowance of ₹ 55,94,000/- for development charges after going through the documentary evidence sub .....

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as income - CIT(A) deleted the addition - Held that:- The amount received by the assessee was against the right of option given to the respective parties and even according to the findings of Ld. CIT(A) these amounts were not received by the assessee in the year under consideration. Out of five parties, three parties refunded back the amounts. Regarding balance two parties, they still did not opt for purchase of plots. In these circumstances, in absence of any contrary material, we do not find .....

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d not get its account audited. However, for the year under consideration there is no failure of the assessee for getting its accounts audited. In the circumstances of the case, we do not find any infirmity in the order passed by Ld. CIT(A) vide which he has held that 10% of the total expenditure was required to be disallowed and such decision of Ld. CIT(A) will be in accordance with action of AO adopted in A.Y. 1999- 2000. Therefore, we decline to interfere in the relief granted by Ld. CIT(A) an .....

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CIT(A) erred in admittim new evidences in contravention of Rule 46A(3) of 1.T. Rules, 1962 and thereby deleting the addition of ₹ 7,22,250/- claimed as compensation paid to prospective buyers for delay in completion of project and further deleting addition of ₹ 55.94 lacs claimed as payment to M/s. R.M. Trust as development charges. 2. On the facts & circumstances of the case and in law, the CIT(A) erred in deleting addition of Rs.I,46,910/- paid as compounding lees to Bangalore .....

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e was a subject matter of great controversies within the members of AOP itself 5. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. 2. Though initially Ld. DR sought adjournment but it was pointed out that it is an old appeal then Ld. DR was fair enough to plead the matter and in this manner this appeal was heard today. 3. Ground No.1, relates to two additions namely ₹ 7,22,250/- and ₹ 55,94,000/-. The is .....

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account of late delivery of the flats, namely Shri Y. Sudhesh and Shri Subhash Menon. The AO disallowed this amount stating that the said payment made by the assessee are gratuitous in nature and without any business consideration. However, Ld. CIT(A), after going through the agreement of the assessee with the respective parties has returned a finding that as per relevant clauses of the sale agreement the buyers were entitled to get compensation @21% per annum in case of late delivery of the fla .....

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AO that as per practice at Bangalore the project will be sanctioned by BMP before commencement of the project and during the project there are possibility that construction of the project may deviate from the plan sanctioned by BMP and in connection with that they collect additional amount as compounding fee. Copy of vouchers relating to the same was also produced. However, AO did not accept the submission of the assessee and disallowed the amount as according to AO the said amount could not be .....

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cts relating to disallowance of ₹ 55,94,000/- are that these were claimed to be paid as development charges towards development of plots which were sold during the year. All these details were filed before the AO as well as Ld. CIT(A). The assessee had purchased a property known as Jade Garden,Western Extension from Shri Satish Pai and for the purpose of developing the land purchased, it entered into an agreement with R&M Trust having office at Bangalore on 1/3/1995 for developing the .....

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e of development is with R&M Trust. The entire cost of development was to be borne by R&M Trust besides making deposit for carrying out the work. Subsequently, it was agreed upon by the parties that the development charges payable to R&M Trust was ₹ 50/sq.ft. From the gross consideration received on sale of flats developed by the said R&M Trust, ₹ 50/sq.ft. was payable and as per terms of agreement a sum of ₹ 59,94,250/- was paid to the R&M Trust. This fact .....

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rial available on record. Appellant has sold plots of Jade Garden during the year. These plots are located at Bangalore at various sites. These plots are developed as per agreement with M/s.R & M Trust. M/s.R&M Trust carried out development work on plot as under: 1. Construction of compound wall around the entire JADE GARDEN ANN EXE layout. 2. Levelling, paving, metalling, flagging, forming, conserving all the roads in the entire JADE GARDEN ANNEXE layout as per approved plans. 3. Fixing .....

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t with hedges, landscaping of green belt area and planning the avenue trees wherever suggested by the architects of the layout. The appellant has paid ₹ 50/- per sq.ft. as development charges on sale of plot. Such development charges have been paid and allowed by AO in earlier assessment years also. The payment of such development charges are also mentioned in tripartite agreement between purchaser of land, appellant and R&M Trust., In view of above discussion, I find no reason in disa .....

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n the other hand, Ld. AR submitted that the order passed by Ld. CIT(A) is a speaking order. It was submitted that all evidences and documents were submitted to the AO and on the basis of those evidences and documents Ld. CIT(A) has arrived at a conclusion that these additions were not called for. To substantiate these submissions Ld. AR has referred to the following evidences, copies of which are filed in the paper book. (i) (a) Regarding addition of ₹ 7,22,250/-, sale agreement dated 5/2/ .....

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ated in Clauses 11(a) and (b) above, upto the date that the VENDER/DEVELOPER intimates that the said Apartment is ready for possession as per the terms of Clause 10 above, compensation at the rate of 21% per annum on the installments of consideration that may have been paid by the PURCHASER to the VENDOR/DEVELOPER as per the terms of Clause 2(a) and (b) above. PROVIDED, however, that the PURCHASER shall not be entitled to claim the aforesaid compensation if the PURCHASER ha delayed/defaulted in .....

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imilar clause is there, as has been reproduced above. Ld. AR has also referred to the copy of the possession letters to the aforementioned parties which are placed at pages 59 & 96 of the paper books. (ii) Regarding addition of ₹ 1,46,910/-, copy of letter dated 22/6/1999 issued by BMP is placed at page 204 of the paper book along with translation thereof at page 205 of the paper book, which read as under: With reference to above, you while individually constructing the building to tha .....

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00/-, at page 168, certificate of the Chartered Accountant in which the receipt of ₹ 59.54 lacs by R&M Trust is acknowledged. (b) Copy of agreement between the assessee and R&M Trust for development of the property is placed at page 169 to 180 of the paper book and the agreement dated 6/9/1995 between R&M Trust and one plot owner Mr. Ramesh Ruparel to show that such development charges were paid. (c) The calculations of the payment made as development charges in respect of plot .....

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0 725 Shobha Sunder 5630 281500.00 716 Peter Rodrigues 5100 255000.00 778 Subha Hari 4565 228250.00 723 Ananda Mohan 3925 196250.00 775 Kshitja Krishnaswamy 4575 228750.00 638 Jayanta Majumdar 5390 269500.00 712 V Krishnan 4700 235000.00 768 Ashutosh Pujari 4560 228000.00 784 Bijendra Singh Verma 4665 233250.00 653 Sonia Dewan 4200 210000.00 628 Anita Gurbaxani 4940 247000.00 785 Bijendra Singh Verma 4665 233250.00 Total 119885 599425.00 5.1 Thus, it was pleaded by Ld. AR that relief has rightly .....

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ale agreement. To fulfill obligation of those clauses the assessee has made payment to the buyers. Thus, the payment of this amount cannot be said to gratuitous in nature as held by AO and Ld. CIT(A) has rightly deleted the addition on the basis of documentary evidences and we find no infirmity in such deletion and we decline to interfere. 6.2 So far as it relates to disallowance of ₹ 1,46,910/-, it is observed that in the letter written by BMP it has clearly been mentioned that is towards .....

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ed relief as this amount was towards the development charges paid to R&M Trust and thus, for this deletion also, we are of the opinion that there is no infirmity in the order passed by Ld. CIT(A). We decline to interfere. 7. In the result, Ground No.1 & 2 are dismissed. 8. Apropos Ground No.3; this issue has been discussed by Ld. CIT(A) in para-5 of his order. The assessee had received option money of ₹ 19,56,000/- from five parties. As per option agreements these parties had given .....

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itted to AO, it was explained that the assessee has received a sum of ₹ 19,56,000/- from five parties out of which deposit received from three parties were refunded back in subsequent year as those parties did not exercise their option for purchase of flats. The balance two parties retained the amount upto the year 2003 as option deposit and due to non-exercise of option to purchase any flats, the said amount was held in the account as option deposit . Thus, it was pleaded that the said am .....

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give over their right to purchase the property. These option money are not received during the year but they were received in earlier year against plots of land of Jade Garden Complex at Bangalore. So this option money cannot be considered as a sale consideration against the intended purchase of various properties as no sale agreements have been executed nor possession of plots have been given. Three parties namely J.J Advani, M.L.Hiranandani and P.L.Mahtani have been repaid option money in AY. .....

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ellant has received only part amount. Balance amounts of ₹ 1,74,400/- and of ₹ 6,59,500/- are still not received by the appellant. Even otherwise this being the option agreement and party has not still opted for purchase of the plots and possession of plots are also not given so same cannot be considered for the purpose of booking the profit from property. AO has not brought anything on record to prove that the said properties are purchased by the buyers and properties are handed ove .....

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other hand, Ld. AR pleaded that it has been clearly brought out by Ld. CIT(A) that this amount was received by the assessee against the right given to purchase the property and even the money was not received by the assessee during the year under consideration but it was received in earlier years. It has also been found by Ld. CIT(A) that the money was refunded to three parties in assessment year 2001-02. In respect of balance two parties, since no property was allotted and no sale agreement was .....

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ee in the year under consideration. Out of five parties, three parties refunded back the amounts. Regarding balance two parties, they still did not opt for purchase of plots. In these circumstances, in absence of any contrary material, we do not find any fault in the relief given by Ld. CIT(A). We decline to interfere and this ground of the Revenue is also dismissed. 9. Apropos Ground No.4; this issue is discussed by Ld. CIT(A) in para-7 of the impugned order. The assessee had paid a sum of S .....

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cept such submission and disallowed 50% of the expenditure under the provisions of section 40A(2)(b) of the Act. During the course of proceedings before Ld. CIT(A) it was submitted that before AO assessee had filed letter dated 12/3/2003, in which all these documents were mentioned. It was submitted that in A.Y 1998-99 no such disallowance was made by the AO for similar expenditure and in A.Y 1999- 2000 disallowance was made on the ground that audit report under section 44AB was not submitted. C .....

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