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TMI Blog2015 (7) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... ot transferable as the same is not a capital asset and consequently no capital gains can be levied? 3. Brief facts of the case are as under: The respondent - assessee is carrying on the business in real estate. Admittedly, he owned 35 acres 6 guntas of land at Kothanur Village. The entire land was converted from agriculture to housing purposes in the year 1992. The Bangalore Development Authority approved the plan for residential group housing scheme over the said land. Subsequently, the plan was renewed on 19.2.1998. The plan covered entire area of 35 acres 6 guntas and the same was signed by the respondent as the owner. The total Floor Area Ratio ('FAR' for short) area sanctioned for the project consisting of 35 acres and 6 guntas is 2,61,912.30 square meters. Out of the same, FAR relating to 1 acre 6 guntas would be 8589.53 square meters. Out of the total extent of 35 acres 6 guntas of land, an area of 34 acres was the subject matter of Joint Development Agreement dated 19.10.1995 entered into between the respondent and the Larsen & Tourbo Limited ('L & T' for short). The remaining extent of 1 acre 6 guntas of land was not covered under the Joint Development Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;transfer' which is liable to capital gain tax. Consequently the long term capital gains were worked out to Rs. 2,48,45,970/-. It is also concluded by the Assessing Officer that the assessee has not declared the long term capital gains either in the original return or in the return filed consequent to notice issued under Section 153A of the Act and assessee had concealed the particulars of income and consciously tried to evade tax and therefore penalty proceedings under Section 271(1)(c) was initiated. 5. The assessment order passed by the Assessing Authority against the assessee was questioned by the assessee before the Commissioner of Income Tax (Appeals) {'Appellate Commissioner' for short} in Appeal No. ITA 315/ACIT.Cen.Cir.2(3)/CIT(A)-VI/2005-06/BLR vide Annexure-B. The Appellate Commissioner on reappreciation of the entire material on record concluded that the relinquishment of FAR of 7575.37 square meters by the assessee in favour of the L & T comes within the definition of transfer as found in Section 2(47) of the Act and therefore the Appellate Commissioner held that the capital gains have arisen to the assessee. Consequently, the Appellate Commissioner uphe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; % of the total built up area/profit. It was further agreed that as and when the proceeds with regard to the sale of built up area were collected, proportionate amount would be credited to the assessee's account. Subsequently on 25.3.1996, on Udhav H. Buxani staking his claim, a four party agreement was entered into i.e., between the assessee, Udhav H. Buxani, M/s Town and Country Developers Private Limited represented by Udhav H. Buxani and L & T. By way of the four party agreement, the security deposit to the assessee and Sri Udhav H. Buxani was decided to be Rs. 2.50 crores each, out of which Rs. 1.25 crores was refundable. It is also not in dispute that the assessee had authorized L & T (developer) to market all the built up area of South City project and he did not intend to retain any portion thereof for himself. 8. The income arising from 34 acres which was the subject matter of the joint development agreement has been shown under the head "income from business" in assessment year after assessment year. However the income earned out of the rest of 1 acre 6 guntas of land had not been shown at all by the assessee in any of the assessment years. According to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment Business Unit." (Emphasis Supplied) 10. From the aforementioned letter, it is clear that there was joint development agreement dated 19.10.1995 governing development of 1 acre 6 guntas of land also owned by the assessee and the accounts of the above have been made in pages 46 and 64 of the seizure memo No.A/DDR-1/5 respectively by the L & T and the assessee separately under the head "1.6 Accounts". The said letter and other documents seized also prove that there was transfer of right (FAR) in favour of L & T in respect of 1 acre 6 guntas of land for the development. What has been transferred in favour of the L & T by the assessee is FAR to an extent of 7575.37 square meters in respect of the land measuring 1 acre 6 guntas held by the assessee, though same was not the subject matter of the joint development agreement entered into on 19.10.1995. 11. As aforementioned, by way of an amended plan approved during the previous year relevant to the assessment year 1999-00, the assessee was eligible for an FAR of 8589.53 square meters. The records make it clear that the assessee as per the plan decided to retain FAR only to an exent of 1014.16 square meters for his residence an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration is paid and such right is not embedded in land, it would not be liable to tax as capital gains. In the instant case as already noticed by us hereinabove the assessee was eligible for a FAR of 8589.53 Sq. Mtrs. However as per the approved plan the assessee retained FAR only to an extent of 1014.16 Sq. Mtrs. for his residence and surrendered the balance of 7575.37 Sq. Mtrs. in favour of Developer (L & T) for construction of flats by receiving consideration of '3.15 Crores. Thus, the transaction in question would squarely fall within the definition of 'transfer' as defined under section 2(47) of the Act inasmuch as the words employed in sub-clause(1) is "sale", "exchange", or "relinquishment" and under subclause ( 2) the words employed is "extinguishment of any rights therein". The said definition is an inclusive definition. The expression must be read widely and not narrowly. It denotes extension and cannot be treated as restricted. A transaction whereunder the right to exclusive possession and enjoyment stood transferred, even subject to right of reversion in favour of the transferor would be covered by this section. In that view of the matter, we are of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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