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Shri Vipin P. Mehta Versus Income Tax Officer-24 (3) (4) , Mumbai

2016 (12) TMI 182 - ITAT MUMBAI

Profit on sale of property – Business income or Capital Gain - Held that:- A perusal of the various recitals in the agreement indicate that apart from acquiring all development rights, the assessee is the de facto owner of the property as he has the absolute rights of possession, developing, selling, receiving sale proceeds, etc. to the total exclusion of the erstwhile owner. This view of ours is further confirmed as perusal of the sale agreement of the said property that the assessee has signed .....

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ities below to be exigible to tax as STCG and not business income. - Decided against assessee - Applicability of the provisions of section 50C - Held that:- Holding that the assessee’s profit on sale of the gala vide agreement dated 30.12.2009 is to be assessed as STCG and not business income the provisions of section 50C are to be invoked and have been rightly invoked in this case by the authorities below. Since the sale consideration stated in the sale agreement dated 30.12.2009 for sale o .....

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authorities below on this issue. In this factual matrix of the case, we uphold the action of the authorities below in disallowing the assessee’s claim for having incurred expenditure as cost of improvement - Decided against assessee - Disallowance out of Wages @10% - Held that:- CIT(A) upheld the said disallowance of 10% of wages expenditure as he found the explanation put forth by the assessee to be unsatisfactory. Before us, except for raising this ground, the assessee has not been able to .....

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erest of justice, set aside the orders of the authorities below on this issue and restore the matter to the file of the learned CIT(A) for fresh consideration and adjudication after affording the assessee adequate opportunity of being heard and to file details/ submissions required and the AO opportunity to rebut the same. - ITA No. 7235/Mum/2014 - Dated:- 18-11-2016 - Shri Jason P. Boaz, Accountant Member and Shri Amarjit Singh , Judicial Member For The Appellant : Shri Satish Mody For The R .....

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iness, capital gains and from other sources. The case was taken up for scrutiny and the assessment was completed under section 143(3) of the Act vide order dated 19.03.2013, wherein the income of the assessee was determined at ₹ 1,04,18,910/- in view of the following additions/disallowances: - (i) Short Term Capital Gains (STCG) ₹ 84,75,112/- (ii) Disallowance of 10% of Wages ₹ 38,334/- (iii) Disallowance of Excess Interest paid ₹ 1,05,628/- (iv) Addition hoc disallowance .....

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firming the order of - the Assessing Officer in respect of the profit on sale on Industrial Gala as Capital Gain instead of Business Income as declared by the appellant. 2. The learned CIT (Appeals) has erred in law and on facts in confirming the order of the Assessing Officer for applying section 50C of the Income Tax Act,1961 for determining the sales consideration of Industrial Gala which was considered as business transactions by the appellant in the Return of Income filed. 3. The learned CI .....

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e Assessing Officer passed without considering the evidence submitted during the course of the assessment and simply relying on the Notice u/s 133(6) of the Income Tax Act, l96l issued by him have not been either severed or not complied by the concerned parties. 5. The learned CIT (Appeals) has erred in law and on facts in confirming the disallowance of ₹ 38,344/- being 10% of the wages without properly considering the facts that the employees have been paid as per the record maintained an .....

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facts in not considering the additional ground filed by the appellant on 23rd Apri1, 2014 as detail below : " 1. The learned Assessing Officer has erred in law and on facts in not reducing the profit from sale of gala amounting to ₹ 22,00,716/- as computed by the appellant in the original return of income while treating the profit from sale of gala as capital gains." 4. Ground No. 1 - Profit on sale of property - Business income or Capital Gain 4.1 In this ground, the assessee as .....

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factory premises at Bhayander. Vide agreement dated 01.11.2007 titled Agreement for Development the assessee took over the entire land of a dilapidated building alongwith development rights for ₹ 11 lakhs. After incurring expenditure of ₹ 57,99,284/- as cost of improvement, etc. the resultant industrial gala was sold vide agreement dated 30.12.2009 to Shri Bharat R. Thakkar and Shri Tanna Thakkar for a consideration of ₹ 80 lakhs. It is contended that the assessee had not purch .....

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evident from perusal of the agreement dated 01.11.2007, that the assessee has acquired the said property alongwith the rights of development of the dilapidated building which was improved/converted to a gala. This envisages that the assessee steps into the shoes of the owner of the property, whatever may be the nomenclature given to the agreement. In this regard, the learned D.R. drew the attention of the Bench to the Sale Deed dated 30.12.2009 of the same property (copy placed at pg. 2 to 20 o .....

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intention that the same were part of business activity resulting in business income, it should have appeared as stock-in-trade in the assessee s Profit & Loss account and Balance Sheet for the period from year ending 31.03l.2008 to 31.03.2010. But this is not the case at all. It is prayed that the above facts clearly bring out that the authorities below were correct in holding that the profit on sale of the aforesaid gala was to be taxed as STCG and not business income as claimed by the asse .....

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t, it was an outright purchase, whereby the assessee stepped into the shoes of the owner. After incurring expenditure on improvement, the assessee sold the property on 30.12.2009 for ₹ 80 lakhs. On appeal, this view was upheld by the learned CIT(A). 4.3.2 On a consideration of the facts of the matter as brought out by both parties, it appears to us that though the nomenclature of the agreement dated 01.11.2007 is given as development agreement, a perusal of the various recitals in the agre .....

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assessee has signed, sealed and delivered the property in his actual capacity as OWNER of the property. If the ownership still vested in the erstwhile owners, as claimed by the assessee, then they should have been at least consenting parties to the sale deed dated 30.12.2009. These documentary evidences, in our view, puts paid to the assessee s claim on facts that the income/profit arising on sale of the gala was his business income. In our view, the income from sale of gala has been correctly .....

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In view of our decision (supra), holding that the assessee s profit on sale of the gala vide agreement dated 30.12.2009 is to be assessed as STCG and not business income (supra), the provisions of section 50C are to be invoked and have been rightly invoked in this case by the authorities below. Since the sale consideration stated in the sale agreement dated 30.12.2009 for sale of gala at ₹ 80 lakhs, was lower than the valuation shown for stamp duty papers by the Stamp Validation authoriti .....

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der section 133(6) of the Act in order to verify the expenditure from following four parties: - (i) Adinath Steel Corporation ₹ 4,58,640/- (ii) Shrinath Corporation ₹ 2,72,456/- (iii) Asif Patel ₹ 1,22,950/- (iv) Shree Ram Trading ₹ 10,350/- (v) N.J. Lala ₹ 22,00,000/- Total ₹ 30,64,396/- Since the notice sent to these parties returned unserved, the AO required the assessee to produce these parties before him for verification. As the assessee neither produced .....

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ion 133(6) of the Act or file confirmation before the AO, the assessee filed the details of additions/cost of improvement expenses alongwith supporting bills in respect of the gala before the AO and therefore the claim ought to be allowed. From an appreciation of the facts of the matter on record, it is seen that the learned CIT(A) has in fact taken due note of the assessee s submissions in this regard at pages 11 to 13 of the impugned order and taken note thereof while dismissing the assessee s .....

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- as cost of improvement in respect of the aforesaid four parties. Consequently grounds 3 and 4 of the assessee s appeal are dismissed. 7. Ground No. 5 - Disallowance out of Wages @10% 7.1 We have heard the rival contentions and perused and carefully considered the material on record. According to the assessee this disallowance of ₹ 38,334/- was not called for since the employees have been paid their wages as per the record maintained which have been filed before the authorities below. As .....

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ee has not been able to bring on record any material to controvert the findings of the authorities below. In this factual matrix of the case, we uphold the disallowance of ₹ 38,344/- being 10% of expenditure incurred on wages. Consequently, ground No. 5 of the assessee s appeal is dismissed. 8. Ground No. 6 - Disallowance of interest expenditure 8.1 In this ground, the assessee challenges the action of the learned CIT(A) in confirming the disallowance of ₹ 1,05,628/- being interest p .....

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