TMI Blog2009 (1) TMI 873X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory provision of discounting the apparent consideration as per section 269UC of the Act in computing the capital gains chargeable to tax. 2. On perusal of the assessment order, it is found that the return of income, declaring total income of ₹ 5,61,00,480, was filed on 31-12-2004. The assessee had declared incomes under various heads including the head of Capital gains in respect of his 44 per cent share in a plot of land admeasuring 1034.07 sq.mts. and located at 23, Barakhamba Road, New Delhi. This income was declared in view of the agreement with M/s. Som Dutt Builders (P.) Ltd. ( Som Dutt ). The capital gains were worked at ₹ 5,03,59,209. However, in the note appended to computation of income, it was mentioned that the agreement by way of collaboration for development of the property was signed on 2-5-1987 and Form No. 37-I under section 269UC was filed before the appropriate authority, declaring the consideration at ₹ 6,76,45,500. As against the aforesaid, the transfer consideration was valued at ₹ 5,99,34,697 based upon the Land Development Office ( L DO for short) rate. Since the assessee had himself shown the consideration at ₹ 6, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this agreement, Form No. 37-I was filed before the appropriate authority on 18-5-1987, in which the apparent consideration was stated to be at ₹ 6,76,45,500, based upon the projected covered area 120550 sq. ft. This also included the basement area, which was intended to be sold. However, on completion of the building, it was found that the basement was required to be used mandatorily for various utilities. Therefore, the covered area was limited to 82807 sq. ft. The assessee s share in the area was worked out to 46371 sq. ft. The building plan was submitted to the NDMC for approval. The sanction was accorded on 21-11-1989 subject to certain conditions. These conditions were not acceptable to the assessee. Therefore, litigation ensued in the High Court and the plans were finally sanctioned on 6-11-1992 as per the order of Hon ble High Court. Thereafter, the assessee allowed Som Dutt to book the area for sale out of their allocation and waived the condition of maintaining an escrow account for deposit of the sale proceeds therein. The work of construction started in February, 1992, when the possession of the plot was handed over to the Som Dutt. There were some disputes betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this is the crux of the matter in appeal before us. In this connection, he filed a chronology of events in respect of the transaction, which is stated as under:- Sl. No. Event Date (i) Collaboration agreement with Som Dutt 2-5-1987 (ii) Filing of Form No. 37-I 18-5-1987 (iii) Power of Attorney issued in favour of Som Dutt 4-6-1987 (iv) Sanction of building plan 21-11-1989 (v) High Court order allowing construction 16-1-1992 ( vi) Letter from Som Dutt intimating the start of the construction work 25-2-1992 (vii) Provisional allocation of area 20-3-1992 (viii) Completion of Narain Manjil Complex 9-6-2000 ( ix) Irrevocable power of attorney in favour of Som Dutt to sell the ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aper, signed in the year 2003, the builder was to retain 44 per cent of the developed area admeasuring 72871 sq. ft. The balance area was allocated between the assessee and the other coparceners and members of the HUF, as per page 8 of the paper book. He referred to clauses (a) and ( b) of the memorandum of agreement which mention that the assessee in his individual capacity as well as in his capacity as karta of Tej Pratap Singh (HUF) was to develop and construct a multi-storeyed commercial building on the respective shares of the property No. 23, Barakhamba Road, New Delhi. On the basis of this clause in the agreement, the case of the learned DR was that it was not a case of transfer of any property to the Som Dutt but a case of development of multi-storeyed commercial building by the Som Dutt, the assessee and his HUF. Therefore, there could have been no question of any transfer taking place as a consequence of this memorandum, which could be done only on final allocation of the area after which the final power of attorney was executed in favour of Som Dutt to sell his portion of the constructed property. Further, it was pointed out that although it was a case of joint developme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his business of real estate, builders and developers, carried out by him as proprietor in the name and style of M/s. Akoi Properties Investments. Further, he appointed Shri Jagbir Singh Sachdev as architect for preparation of building plans and technical supervision. He also appointed Som Dutt as contractor to develop and construct multi-storeyed commercial building at its own case on the plot of land, as per clauses (10) and (11). For the consideration, the assessee agreed to allocate to Som Dutt 40 per cent of the built-up space, capable of independent use. For the purposes of the agreement, certain terms were defined in it. Transfer of plot meant and included the ultimate transfer by the owner of the perpetual lease hold rights in favour of a co-operative society/a limited company, association of buyers etc., for which the cost was to be borne by the transferee(s). The Som Dutt was required to take all steps for obtaining all clearances for the construction but could make any change in the sanctioned plan only with the previous written consent of the assessee. It was required to complete the construction within 36 months from the date of sanction of the plans. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of conversion. In absence of any satisfactory argument to the contrary, it is held accordingly. The Assessing Officer shall ascertain the fair market value of the property held by the assessee as on 2-5-1987. Both the parties will be entitled to lead the evidence in this behalf. On ascertaining the value, the Assessing Officer shall compute the capital gains arising on account of conversion of the asset into stock-in-trade. Thus, we are now left with the question of date of sale or otherwise transfer of the stock-in-trade held by the assessee on 2-5-1987. 5.3 From the perusal of the agreement dated 2-5-1987, it is clear that the assessee appointed an architect and a builder, Som Dutt, for construction of Narain Manjil. There was no transfer of any capital asset on this date to Som Dutt. The assessee filed Form No. 37-I on 18-5-1987. In paragraph 10, the assessee mentioned that the transfer, if any, will be registered with Sub-Registrar, New Delhi. The case of the ld. counsel was that the provision contained in section 2(47)( vi) and section 269 UA(f)( ii) are in pari materia and, therefore, since there was a transfer within the meaning of section 269U(f)( ii), there was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... molish any building on the property subject to its settling the claims of the tenants. In pursuance of the agreement, Floreat obtained permissions from CRZ authority on 7-2-1996, and a letter from ULC for development of the property dated 26-4-1995. By 31-3-1996, Floreat had paid almost the entire consideration to the assessee. However, the important point which is required to be noted is that the BMC issued commencement certificate permitting construction of the building up to plinth level on 15-11-1996. In the mean time, the plan was amended and ultimately the power of attorney was executed on 12-3-1999. The dispute in the case was whether capital gains were taxable in assessment year 1996-97 as per the department or in assessment year 1999-2000 as per the assessee. The assessee had shown capital gains in assessment year 1999-2000 and the tax was paid in that year. The Hon ble Court referred to the amendment made in section 2(47) with effect from 1-4-1988, wherein clauses (v) and (vi ) were inserted in the section. The case of the assessee was that the date on which the possession was parted by the transferor is the relevant date for determining the year of taxation. The irrevoca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isfied at the time of executing the agreement or filing Form No. 37-I. In any case, no NOC was issued to the assessee. Thus, it is held that stock-in-trade was not sold or transferred till the filing of Form No. 37-I. 5.5 The assessee was intimated about the sanction of the plan by the New Delhi Municipal Committee on 21-11-1989, but this sanction was subject to some conditions. The assessee moved a civil writ petition No. 3274(Del.)/1991 before the Hon ble Delhi High Court, which was decided on 16-1-1992. The assessee had represented that he may be allowed to proceed with the construction work at the site according to building plans sanctioned by the NDMC at his own risk and subject to the final outcome of the writ petition. The Hon ble Court passed the orders accordingly on 16-1-1992. It is also seen that the litigation in respect of Malvinder Kaur Another was decided by the Hon ble Supreme Court on 7-7-1997. The petition of Malvinder Kaur Another was dismissed as withdrawn. The appeal was withdrawn as a consequence of settlement between various parties. Finally, the construction of Narain Manjil was completed on 9-6-2003 as certified by the architect. Built-up area of 463 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... became entitled to hold the property fully or partly as an owner. The allotment of space by it also did not lead to inference that the ultimate buyers became entitled to possession and enjoyment of space allotted to them by dint of holding shares in any company or co-operative society. The material event occurred on 10-9-2003 when an irrevocable power of attorney was issued by the assessee in favour of the Som Dutt under which the latter became entitled to possession and disposal of the area allocated to it. Therefore, we are of the view that the stock-in-trade was otherwise transferred by the assessee to the Som Dutt on 10-9-2003, a date filling in the assessment year under consideration. This conclusion is fully in consonance with the decision of Hon ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia (supra). Therefore, profit arising on account of the transfer of the stock-in-trade, representing the difference between the fair market value of the built-up area-allotted to the assessee and fair market value of the capital asset on its date of conversion into stock-in-trade will become taxable as business profits in this year. In the result, it is held that the capi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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