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2016 (1) TMI 1305 - ITAT CHANDIGARH

2016 (1) TMI 1305 - ITAT CHANDIGARH - Tmi - Addition on account of CLU and EDC charges - Held that:- In the light of the MOU and the letter from Town & Country Planning, Haryana, it is clear that assessee was service provider to Inscol and made available lands to the Inscol at a fixed price which includes the CLU and EDC charges. Since, the Government did not grant CLU, therefore, assessee refunded ₹ 2 Crores to Inscol and has shown as liability in the balance sheet. ₹ 40 lacs was in .....

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y of the MOU is filed on record which shows that assessee would be entitled for the amount for sale of the land at fixed price which includes the cost of the land paid to the land owners and stamp duty and registration charges. Therefore, the general proposition adopted by the Assessing Officer would not be applicable to the facts and circumstances of the case. This fact is supported by the balance sheet of Inscol which revealed that it has purchased the land inclusive of stamp duty and registra .....

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e hands of the assessee. Since it was liability of the assessee to bear the expenditure incurred on account of forfeited amount as advance given to the land owners, therefore, it shall have to be allowed as deduction in favour of the assessee. Further, on the same anology, when the Assessing Officer has allowed cost of land i.e. payment made to the land owners as deduction in favour of the assessee in rectification order, there was no reason to disallow the deduction of ₹ 50 lacs on this i .....

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reply have been filed before ld. CIT(Appeals). Further, no vouchers or evidences have been produced before us on this issue, therefore, we are unable to interfere with the orders of the authorities below on this issue. We, accordingly, confirm the addition. - Appeal of the assessee is partly allowed. - ITA No. 248/CHD/2014, And ITA No. 174/CHD/2014 - Dated:- 5-1-2016 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND Ms. RANO JAIN, ACCOUNTANT MEMBER For The Department : Shri Manoj Mishra For The As .....

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ned order. The assessee company had procured land on behalf of M/s Inscol Healthcare Ltd. (hereinafter referred to as Inscol) in pursuance to Memorandum of Understanding (MOU) dated 11.07.2007 ). The relevant clause of the MOU between first party i.e. Inscol and second party i.e. the assessee are as under : 1. That the First Party agrees to the proposal mooted by the Second Party that they will provide the said land at rate of ₹ 60 lakhs per acre and the amount will include: • The cos .....

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bility till the registration and CLU of the said land takes place. 5. That the first party shall pay the stamp duty/registration expenses/Miscellaneous and same shall be deducted from the agreed price mentioned in the clause l or sale consideration. 6. The first party shall not be responsible for advances given for purchasing land on behalf of first party in case registration of land is not done or in case of forfeiture of advances. The amount of advances forfeited shall be borne by the second p .....

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es shall be allowed only after production of necessary evidence. In case of rejection of permission no services charges shall be paid by 1 st party to 2nd party. 8. That first party shall not interfere in purchase price paid to land owners or amount paid at the time of registration & only abide by the terms & condition & consideration mentioned in clause 1 of this mou. 4. In pursuance of the MOU, the assessee company purchased land from various land owners and transferred the same to .....

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- ii) Advance forfeited against land by land owners ₹ 50,00,000/- iii) Stamp Duty ₹ 57,15,000/- iv) Registration Expenses ₹ 5,44,000/- v) Misc. Expenses ₹ 4,35,000/- vi) CLU & EDC Charges ₹ 2,40,00,000/- 5. The Assessing Officer did not allow the claim of Stamp Duty and registration expenses paid by the assessee on the ground that in normal course, stamp duty and registration charges are paid by buyer. The Assessing Officer also noticed that assessee had reduced .....

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sessee had not paid any CLU charges and so, its claim of reducing CLU charges from sale proceeds was not correct. The Assessing Officer, accordingly, reduced the amount of ₹ 2,40,00,000/- from cost of acquisition. However, subsequently, a rectification order has been passed by the Assessing Officer, since the action of the Assessing Officer resulted into double disallowance of ₹ 2,40,00,000/-. 6. The assessee had also reduced an amount of ₹ 50 lacs from the sale consideration o .....

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rty entirely different from the property in respect of which short term capital gain had been declared. The assessee's counsel admitted that the advances were paid to these persons for acquisition of land other than the land for which short term capital gain had been declared. But these lands could not be acquired. The Assessing Officer, therefore, reduced the cost of acquisition by ₹ 50 lacs. The Assessing Officer has also reduced the cost of acquisition by ₹ 4,35,000/- claimed .....

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al and need no adjudication. 10. On ground No. 2, revenue challenged the deletion of addition of ₹ 2,40,00,000/- on account of CLU and EDC charges. The assessee submitted before ld. CIT(Appeals) that assessee company has agreed to pro vide the following services to Inscol for a consideration of ₹ 10,47,50,000/- i.e (i) Procurement of land ( cost of acquisition + Stamp Duty + Registration Charges) and (ii) Getting permission from Director, Town & Country Planning, Haryana for sett .....

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ana Government on account of EDC and CLU charges. The assessee company has incurred expenses amounting to ₹ 40 lacs on account of EDC and CLU charges. 11. The ld. CIT(Appeals), on examination of the material found that the amount of ₹ 2,40,00,000/- was on account of CLU and EDC charges. The assessee had shown this amount as liability in the balance sheet. As per assessee, expenditure of ₹ 40 lacs was incurred on this account but the Government did not grant CLU and so the asses .....

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The ld. DR relied upon order of the Assessing Officer and contended that this amount was paid to the assessee, therefore, it was income of the assessee. The ld. counsel for the assessee, however, reiterated the submissions made before authorities below and submitted that assessee is a service provider and these expenses included in the value of the land. Copy of the MOU in reference has been filed. Copy of the letter from Director, Town & Country Planning, Haryana dated 03.11.2008 is also f .....

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liability in the balance sheet. ₹ 40 lacs was incurred for getting CLU, therefore, ld. CIT(Appeals) was justified in holding that the amount shall have to be reduced from the total receipts received from Inscol. We, therefore, do not find any merit in this ground of appeal of the revenue. The same is accordingly, dismissed. 13. On ground No. 3 and 4, revenue challenged the deletion of addition of ₹ 57,15,000/- on account of payment of Stamp Duty charges and in deleting the addition o .....

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es and sales have been made, it has been made on behalf of Inscol. The sale price is inclusive or exclusive of Stamp Duty or payment of Stamp Duty met by the purchaser or seller is as per agreement between assessee and Inscol. The MOU clearly shows that Inscol has given credit of sale consideration and commission to the assessee and whatever the payment to land owner and payments towards Stamp Duty and Registration Expenses, has been debited to the assessee's account. The assessee also filed .....

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The ld. CIT(Appeals) considered the issue in the light of the MOU between assessee and the buyer and found assessee was to bear Stamp Duty and Registration Expenses. The MOU was for purchase of land by the assessee on behalf of Inscol and all the details regarding who will make the payment for what, are mentioned in this MOU. Perusal of the balance sheet of Inscol reveals that it had purchased land inclusive of Stamp Duty and no stamp duty and registration charges was separately debited to the l .....

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ground of appeal of the revenue. The ld. DR relied upon order of the Assessing Officer. The copy of the MOU is filed on record which shows that assessee would be entitled for the amount for sale of the land at fixed price which includes the cost of the land paid to the land owners and stamp duty and registration charges. Therefore, the general proposition adopted by the Assessing Officer would not be applicable to the facts and circumstances of the case. This fact is supported by the balance she .....

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. 18. On ground No. 2, assessee challenged the addition of ₹ 50 lacs on account of advances forfeited by the land owners. 18(i) The assessee submitted before ld. CIT(Appeals) that assessee is only a service provider and received commission on sale and purchase made on behalf of Inscol. During the course of procurement of land, Inscol has made payments amounting to ₹ 50 lacs to Shri Nirmal Gurdev, Shri Sandeep Singla and Prabhjit Singh as advance against purchase of land for its hospi .....

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be allowed as deduction or alternatively, only commission income on behalf of Inscol should be treated as income. It is highly unjustified to take the receipt as income and disallow the payment made on behalf of Inscol. The assessee filed copy of account of Inscol and copy of the agreements for purchase of land for consideration. 19. The ld. CIT(Appeals),considering the submissions of the assessee, noted that lands were finally not purchased by assessee and these three persons forfeited the amou .....

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e as clause-I and 6. On the other hand, ld. DR relied upon order of the authorities below. 21. On consideration of the rival submissions, we do not find any justification to sustain the addition of ₹ 50 lacs. It is not in dispute that advances were given for acquisition of land to three persons in a sum of ₹ 50,00,000/-. It is also not in dispute that Inscol could not purchase the land from these land owners and the amounts were forfeited by the land owners. Inscol has debited the as .....

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o provides that Inscol (first party) shall not be responsible for advances given for purchasing land, in case registration of land is not done or in case of forfeiture of the advance amount. The amount of advance forfeited shall be borne by second party i.e. assessee company or deducted from the agreed sale consideration. It would, therefore, clearly show that forfeited amount has been included into the total sale consideration and in case of forfeiture of advance, it shall be borne by the asses .....

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