TMI Blog1998 (8) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... pment of Plot No. 1087 CST No. 1051 Mulund (W) Bombay to Marathon Combine price 71,79,720 Less : Cost of plot purchased as per valuation report of Mr. Namavati Roshan attached 11,83,159 Legal fees payable : M/s Soloman Co. 1,00,000 H.P. Ranina 6,750 Mr. Namavati 1,500 D.M. Harish 4,000 M.R. Deshpande 10,000 M.K.S. Chave 500 Other legal provision 35,000 1,57,750 Paid to compound wall 16,750 Demolition of office shatter temporary office construction (as per statement) 47,775 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the said property this Agreement shall stand automatically terminated and cancelled and the owner shall within thirty days of receipt of the intimation of the order of the Appropriate Authority for acquisition of the said property refund to the Developers the earnest money without interest against the other. 6. The Developers shall pay the balance of consideration of ₹ 1,01,92,500 as follows: i. ₹ 33,97,500 (Rupees Thirty Three lacs ninety seven thousand five hundred only) within 6 months from the date of execution of this Agreement. The Owners shall be entitled to make time as the essence in this respect by giving 15 days notice in writing to the Developers on expiry of such 6 months. ii. ₹ 56, 62,500 (Rupees Fifty Six lacs sixty two thousand five hundred only) within 9 months from the date of execution of this Agreement. The Owners shall be entitled to make time as the essence in this respect by giving 15 days notice in writing to the Developers on expiry of such 9 months and the balance of; iii. ₹ 11,32,500 (Rupees Eleven lacs thirty two thousand five hundred only) before delivery of charge of the said Property to the Developer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s all amounts paid by the Developers to the owner in pursuance of the Agreement with interest earned by the owner thereon the thereupon neither party shall have any other claim against the other. ** ** ** 15. On the Developers paying to the owner the consideration in full as provided herein the owner shall deliver to the Developers charge of the said property. Until payment by the Developers to the owner of the consideration in full the Developers shall have no right title permission or authority to enter upon the said Property for any purpose whatsoever. 16. The owners shall at the option of the Developers handover possession of the said property to the Developers at any time before execution of the conveyance after full payment of the consideration and against execution of the supplementary agreement providing for possession on which the appropriate stamp duty payable in that case shall be paid by the Developers. 17. ** ** ** 18. ** ** ** 19. ** ** ** 20. Within 12 months of the completion of construction of new building on the said property as provided herein the developers shall form a Co-operative Housing Society of holding of premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it offered capital gains of ₹ 57,14,286 for the assessment year 1993-94, ₹ 5,60,341 for the assessment year 1994-95 ₹ 5,72,923 for the assessment year 1995-96. The sale consideration taken into account for working out the capital gains is ₹ 71,79,720 in the assessment year 1993-94, ₹ 6,69,037 in the assessment year 1994-95 and ₹ 7,07,695 in the assessment year 1995-96. As the plot was acquired in 1968, the appellant opted for the substitution of its value as on 1-4-1981 as permitted under the Act and for this purpose, it got the plot valued by an approved valuer and the approved valuer, Dr. Roshan H. Namavate, determined the value of the plot as on 1-4-1981 at ₹ 11.83 lakhs after taking into account the cost inflation index multiplier of 2.23. As the capital gains were returned in three different assessment years, the cost of the plot for the purpose of working out the capital gains was also taken proportionately in the respective years. The Assessing Officer held that the sale consideration should be taken at the figure of ₹ 1,13,25,000 stipulated in clause (1) of the agreement. He was of the view that there cannot be a transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of hypothetical sale consideration mentioned in the agreement of ₹ 1,13,25,000. This amount was never received and it was stipulated only on the basis of an optimistic estimate that the FSI that would be available was of the order of 1,672 sq. mtrs. The FSI of 1,672 sq. mtrs. was not allowed and so there was no question of receiving consideration of ₹ 1,13,25,000. The learned counsel for the assessee invited our attention to clause 10 of the agreement which we have extracted hereinbefore and pleaded that in terms of this clause, the consideration had to be scaled down on the basis of FSI that became actually available. It is pleaded that the assessee cannot be subjected to taxation in respect of an income that was never received. 6. The learned counsel has invited our attention to appellant s letter dated 5-10-1995 addressed to the Assessing Officer which may be seen at pages 87 to 89 in which it was submitted as follows: Society entered into Agreement for Development dated 26-6-1992 for FSI to be consumed by Developer, M/s. Marathon Combines for Plot area of 1,672 sq. mtrs. The said Plot No. 1087 is an amalgamated plot with Plot No. 1088, and thus total plot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall remain vested with Society as its Plot. 7. In the light of the above clarification, it is also pleaded that the method adopted by the assessee for offering the capital gains in respect of the transfers involved under the agreement is quite correct and required no disturbance. In other words, the plea taken is that there was not a single transfer under the agreement but there were transfers of development rights in stages as per the FSI that became available in different years. It is stressed that the possession of entire plot was not granted and possession of only 1,253 sq. mtrs. was granted in different years, and possession of the balance of 419 sq. mtrs. was never granted. It is also pleaded that it was not incumbent upon the appellant to go to the Appropriate Authority for obtaining a No Objection Certificate at each time of the transfer because the Appropriate Authority had already granted its approval and the authority was quite aware of the terms of the agreement as per which the consideration of ₹ 1,13,25,000 was only an assumed figure and clause 10 of the agreement made it clear that the assessee would be entitled only for a reduced consideration in case t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the question is whether the transfer of the development rights has taken place in one year as per the agreement or whether there are transfers in stages and the claim of the appellant that there are transfers of the development rights in stages is correct. The learned counsel for the assessee invited our attention to the correspondence between the appel-lant and M/s. Marathon Combines and from this correspondence which is in the appellant s paper book, it appears to us that the possession of entire 1,672 sq. mtrs. was never given to the developers and what was given was given only in stages. In a letter dated 21-10-1992 addressed by M/s. Solomon Co., Advocates of the appellant, the former categorically mentioned that his clients, i.e., Marathon Combines would be entitled for only to possession of conveyance of 1,060 sq. mtrs. of land which has been arrived at after excluding the area covered for recreation ground and other deductions. This letter may be seen at pages 45 to 49 of the appellant s paper book. In other words, the possession is claimed by M/s. Marathon Combines only to 1,060 sq. mtrs. which is proportionate to the FSI obtained in the first stage. In the subsequent l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yellow on the sketch hereto annexed. The area of plot on which your building is under construction is enhanced from 1,060 square metres to 1,149 square metres and you are permitted to carry out construction of a building with FSI of 1,149 square metres on the aforesaid plot denoted with letter B on the sketch hereto annex. [Emphasis supplied] In the subsequent letter dated 24-12-1993 which may be seen at pages 64 to 65, the assessee has made it clear that it had granted licence to the latter to enter upon and charge an additional portion admeasuring 89 square metres of the plot in question making a total area of 1,149 sq. mtrs. Letter dated 29-9-1994 addressed by Marathon Combines reads as follows (which may be seen at page 75 of the appellant s paper book): As per the earlier correspondence and agreement we wish to inform you that M.C.G.B. has approved the plans for additional F.S.I. to the extent of 104 sq. mtrs. The payment for this area works out as follows: Rs. 104 sq.mtrs. x 8,611/20 sq.mtrs. 8,95,565 Less : Expenses 1,87,870 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot disputed that the conveyance of the land in question in favour of the proposed co-operative society to be formed by the developer subsequent to the construction as mentioned hereinbefore, was not even executed in the year of account relevant for the assessment year 1993-94. In these circumstances, we have to hold that there was no transfer of 1,672 sq. mtrs. and so the revenue was not justified in working out the capital gains on the basis of the said consideration of ₹ 1,13,25,000. A licence to enter upon the land or possession of the land was given only in stages and as some consideration has also been received in pursuance of the agreement dated 26-6-1992, we have to hold that the transfer has taken place in stages in terms of section 2(47)(v) and accordingly, the capital gains has to be levied in the relevant years as returned by the appellant. In the circumstances, we have to set aside the orders of the revenue authorities on this issue. The capital gains for the assessment year 1993-94 may be worked out on the basis of the sale consideration actually received in respect of FSI of 1,060 sq. mtrs. which is ₹ 71,79,720. Subject to this remark, the main ground is a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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