TMI Blog2007 (9) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... . According to the assessee, the Karta of the assessee-HUF, Mr. Ashok Kapur, wanted to start a business of real estate in the name of another entity named Ashok Kapur Co. HUF. Therefore, on 6-11-1979 Mr. Ashok Kapur made a declaration that he as Karta of Ashok Kapur, HUF (the Assessee) was converting the assessee s share in the property as stock-in-trade of the new venture to be started in the name of Ashok Kapur Co. (HUF). Based on the rates fixed by the Land Development Office ( L DO ), the Assessee s share in the property was valued at ₹ 5,58,000. This was taken to be the market value of the assessee s share of the property on the date of conversion and the same amount was credited to the capital account of Ashok Kapur Co. (HUF). 4. Mr. Ashok Kapur, describing himself as Karta of Ashok Kapur Co. (HUF) entered into an agreement with Ansal Properties Industries ( Ansal Properties ) on 19-11-1979 for construction of a multi-storeyed building at Barakhamba Road. In this agreement Ashok Kapur is described as Owner Dealer and Ansal Properties, as Builders. The Builders were to demolish all the structures at 21, Barakhamba Road for constructing the multi-storeyed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty to the joint venture. Consequently the CIT(A) held that such transfer was assessable to capital gains tax in the hands of the assessee. The ITO was directed to re-compute the assessee s total income even while the computation of capital gains at ₹ 3,77,250 was affirmed. 9. The assessee s appeal ITA No. 5098 (DEL.)/1983 was allowed by the Tribunal by an order dated 31-12-1984. The conclusions of the Tribunal as set out in para 24 of its order read thus : (1) The assessee s admitted conversion of his immovable property into stock-in-trade on 6-11-1979 has not resulted in any transfer within the meaning of Income-tax Act for the purpose of charging of capital gains. Firstly we have not accepted the bona fides of such conversion and secondly we have held that the legal effect of such conversion, even if, it had taken place, could not be a transfer for the purpose of charging capital gains. (2) By entering into an agreement with the Builders M/s. Ansal Properties and Industries Pvt. Ltd. The assessee did not enter into a partnership agreement and the two parties were to deal with each other on principal to principal basis. The important elements of partnership were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital for the purpose of carrying on the business. And whereas M/s. Ashok Kapur Co. (HUF) is carrying on the business of dealing in real estates, sale and purchase of immovable properties and property agents; builders, contractors and financiers. Whereas the Builder is proposing to build a composite multi-storeyed commercial building on the entire premises No. 22, Barakhamba Road, New Delhi, and has offered in connection therewith to the owner dealer to erect a part of the said proposed multi-storeyed commercial building on the one-fifth share of the Owner Dealer in the said property (which amounts to One Eighth share in the said premises No. 21, Barakhamba Road, New Delhi, after demolition of existing structures, at Builder s own cost and expenses and with Builder s own resources and to pay in respect thereof or therefor all incidental and other charges including but not limited to commercialisation charges in consideration of the Owner Dealer allocating to the Builder 50 per cent of the Owner Dealer s share, as hereinafter defined, in the said multi-storeyed commercial building, in the manner and subject to and on the terms and conditions hereinafter contained. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es as contained hereinafter. 15. Again, the aforementioned definitions reveal the intention of the parties that the Builder s allocation was an identified portion of the property in question and that such allocation was to take place in terms of agreement itself. The expression transfer of space was defined to include transfer by delivery of possession which also indicates that this was not an exhaustive but an inclusive definition. 16. Clause 6 of the agreement talks of the restrictions on Builder occupying and using any part of the existing construction and structures unless certain approval has been obtained from the authorities. Clauses 22 and 23 of the agreement is significant and reads as under : 22. The Builder is allowed to agree to sell the area comprised in Builder s allocation his portion of 50 per cent area to prospecting Flat Buyers at Builder s own risk and responsibility even prior to the sanctioning of the Building plans and the approval of the Project Building by the concerned authorities or commencement of construction. The Builder shall be entitled to sell to any third person whole or part of the saleable floor space, basement space, and parkin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r pursuant to the agreement there was a transfer of an asset from one party to the other. Even if one were to accept the argument that there was no joint venture between the assessee and M/s. Ansal Properties, still the inescapable conclusion is that there was a transfer of property from one entity to the other. In that view of the matter, this Court is unable to agree with the Tribunal that there has been no transfer by the assessee of its right in the property in question. 19. We are also not persuaded by the reasoning of the Tribunal that there is no capital gains arising from such a transaction since the value of the property in the hands of the assessee was not indicated anywhere in the agreement. We are of the view that even if the agreement did not spell out the value of the property in the hands of the assessee, the valuation of the property in question indicated by the assessee itself in its accounts should be sufficient for the purposes of computation of capital gains tax. 20. In that view of the matter, the impugned order of the Tribunal to the extent it holds that there was no transfer of the assessee s share in the property in question from the assessee to the Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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