TMI Blog2015 (11) TMI 1010X X X X Extracts X X X X X X X X Extracts X X X X ..... llotted to the assessee could be used only for activity of information technology was very much in the knowledge of the assessee on the date of making the payment i.e. on 02.09.05 and even on 04.08.06 when the subsequent allotment letter was issued. The assessee did not revert back to the builder that since he was not in the activity of information technology, hence his principal amount be refunded. The facts itself speak that the assessee had advanced the money to the builder to make quick profits either by way of interest or by way of share in the profits which the builder may gain by selling the properties. The assessee neither executed any conveyance deed nor had been consenting party to any deed for conveyance executed between the builder and the actual purchaser of the property. The possession and ownership of the offices in question always remained with the builder. The assessee had been offered the amount of interest/profit on the finances provided by the assessee to the builder. Under such circumstances, the income accrued to the assessee relating to the above transaction has rightly been assessed by the lower authorities as income from other sources. We do not find any in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as long term capital gains. The AO from the above facts observed that the assessee had got final allotment of the said office premises on 04.08.06 and the rights were sold/transferred on 17.12.08 and as such the holding period of the rights was less than 36 months. The gains arising there from had to be taxed as short term capital gains. He asked the assessee to explain in this respect. The assessee furnished the necessary explanation accordingly. After considering the explanation submitted by the assessee, the AO observed that the assessee had not entered into an agreement for sale of the above mentioned office premises with the builder which can be said to have created any enforceable rights in the asset. On the date of allotment letter, the property in question was not in existence. The whole exercise was speculative in nature for making quick profits. The assessee had never taken the possession of the property. The assessee was not in the business of buying and selling of the properties also. Hence, the income earned by the assessee from the said property was not the business income of the assessee. He, therefore, taxed the income of the assessee under the head income fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... simply wrote to the builder to sell the properties and pay him the surplus. No rights were transferred by the assessee either in favour of the builder or in favour of any actual purchaser of the property. The Ld. CIT(A) thereafter concluded that the first letter of 2005 was a fabricated document and no rights had passed to the assessee even vide the second allotment letter of 2006 and there was no transfer of any right as there was no mention of any obligation on the part of respective parties, consideration, schedule of payment, date of completion of building and date of handing over of the possession etc. The necessary ingredients of a valid agreement i.e. proposal, acceptance, consideration along with rights and obligations of the respective parties was missing. The Ld. CIT(A), therefore, held that whatever interest/stake was created by the assessee was sold by the builder and the surplus so earned by the assessee is to be assessed as income from other sources. Being aggrieved by the order of the Ld. CIT(A), the assessee has come in appeal before us. 5. We have heard the rival contentions and have also gone through the records. Before us, the assessee has made the following w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of ₹ 48,02,000/- was paid by the assessee to the builder for the purchase of above stated 5 offices by way of cheque No.237626 dated 02.09.05 and the builder had issued separate receipts regarding the advance received in respect of the above stated five offices all dated 06.09.05. He has further submitted that a vested right had occurred to the assessee on the date of booking of the offices in question. The said right was sold by the assessee after 3 years; hence, the resultant gains were taxable as long term capital gains. On the other hand, the Ld. D.R. has relied upon the findings of the lower authorities. 7. We find that though as per the findings available on record, the amount has been paid by the assessee to the builder vide cheque dated 02.09.05 and in lieu of which the 5 receipts dated 06.09.05 were issued by the builder to the assessee. However, a perusal of the letters dated 02.09.05 and dated 04.08.06 reveals that the commencement certificate and approval of building plan was issued by the competent authority on 03.08.06. Surprisingly, the fact of above issuance of commencement certificate dated 03.08.06 finds mention in the letter dated 02.09.05 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only . Even if, we rely upon the letter dated 02.09.05, it is clear that the assessee on the date of issuance of cheque for the advance amount was made aware that the authorized user of the office premises would be only in relation to the activity of information technology and no other activity was permissible to be carried out in the said offices. The identical wording has also been mentioned in the allotted letter dated 04.08.06. The assessee, thereafter wrote a letter dated 15.11.08 to the builder that he had booked the said offices specifically for extending his business and opening of branch office in Mumbai area, however since it had been mentioned in the said letters dated 02.09.05 and 04.08.06 that the allotted space could be used for activity relating to information technology and that the assessee had no such activity, hence a request was made to the builder to sell, transfer the rights of the assessee in the said offices to other parties at the best available market price and remit the principal amount and the gains thereupon to the assessee. The builder thereafter vide letter dated 17.12.08 informed the assessee that the office premises could be sold at ₹ 1,18,64 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the another decision of the Hon ble Delhi High Court styled as Gulshan Malik vs. CIT (2014) 223 taxman 243 wherein the Hon ble Delhi High Court had been of the opinion that the capital asset has been defined in extremely vide terms. The Hon ble Delhi High Court interpreting section 2(47) which defines transfer and considering the second explanation to clause (v) (vi) of the section observed that the possession, enjoyment of property as well as any interest in any of transferrable capital asset was included within the ambit of capital asset. The Hon ble Delhi High Court has held that even booking rights or rights to purchase the apartment or obtain its letter was also capital asset. The Hon ble Delhi High Court in the case of CIT vs. Ram Gopal (supra) has also reproduced the relevant part of observations in the case of Gulshan Malik vs. CIT (supra) which for the sake of reference are reproduced as under: 7. It is clear that a capital asset under the Act is property of any kind that is held by the assessee. Necessarily, a capital asset must be transferable. Thus, to understand what kind of property can be considered a capital asset, it would be apposite to refer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not applicable to the facts of the present case. The other case laws relied upon by the Ld. A.R. as referred to in his written submissions as reproduced above, are also related to the rights or interest in the property which were either in existence or there was no dispute about the very existence of the property itself. However, in the case in hand as discussed above neither the property in question i.e. the so called office premises was in existence nor its building plan or specifications were approved from the Municipal Corporation and neither any construction activity or commencement of the project had started. There is no document on the file which may suggest that there was even very likelihood of the alleged property coming into existence in the near future giving any right to the seller to sale any interest in the same or any accrual of right in favour of the intending purchaser. 8. Now coming to the sale of the said rights. The excuse given by the assessee was that since he was not involved in any activity of information technology, hence the offices be sold to the another party. As observed above, the fact that the said office premises alleged to be allotted to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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