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Matoshree Realtors Versus JCIT, Range-18 (3) And ITO, Wd. 21 (2) (2) , Mumbai

2017 (12) TMI 576 - ITAT MUMBAI

Gain from relinquishment of booking rights in the project - LTCG OR STCG - holding period of the asset - to be reckoned from the date of MOU or offer letter - Held that:- In the offer letter, except area to be purchased and rate agreed upon, no other terms and conditions are mentioned. The acceptance letter issued by Kohinoor Projects Pvt Ltd, one of the consortium partners, simply confirms the arrangement as stated in the offer letter of the assessee subject to receipt of payment on stipulated .....

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eriod of asset is still less than 36 months. Therefore, we are of the view that the assessee has got valid right over property on 05-10-2007, but not on 25-06-2005 and hence, the A.O. was right is treating surplus from surrender of booking right under the head short term capital gain. The CIT(A), without appreciating facts, held that the impugned asset is long term capital asset. - Disallowance of interest paid on loan taken against security of fixed deposit - Held that:- Admittedly, in this .....

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ction towards interest paid on loan against interest earned from fixed deposit. - In this case, the assessee has paid interest to the bank for loan borrowed against security of fixed deposit. Admittedly, such loan has been utilized for advancing interest free advances to sister concerns and associates. This fact has been admitted by the assessee before the lower authorities. Though the assessee claims to have advanced loans to sister concerns out of commercial expediency failed to prove any .....

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erest is charged on loans and advances from the parties and the same is part of receipts of the assessee for the relevant financial year, then the same needs to be set off against interest paid to the bank on loan borrowed against security deposit, if there is a direct nexus between loans borrowed from bank and loans and advances to other parties. Since, the assessee has raised the issue for the first time, and the lower authorities did not have an occasion to examine the claim of the assessee, .....

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dministrative and other overhead expenses which are necessarily to be incurred for keeping corporate entity of the assessee, whether or not any income is generated out of business activity. Therefore, we are of the view that the CIT(A) was right in directing the AO to allow deduction towards expenditure. - I.T.A No.2303/Mum/2015 And I.T.A No.3504/Mum/2015 - Dated:- 8-12-2017 - Shri C.N. Prasad (JUDICIAL MEMBER) And Shri G Manjunatha (ACCOUNTANT MEMBER) For The Assessee : Dr K Shivram For The Rev .....

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f appeal:- 1. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred (i) Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) erred in directing the Assessing Officer to treat the capital gain arising from surrender of Rights by cancellation deed at ₹ 45,07,91,4821- as Long Term Capital Gain instead of Short Term Capital Gain of ₹ 77,23,00,8181- as assessed by the Assessing Officer . (ii) Whether on the facts and circumstances of the .....

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real asset . (iv) Whether on the facts and the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to allow expenses claimed by the assessee of ₹ 4,90,8681- without accepting the fact that the assessee has not carried out any business activity during the year . 2. For this and other reasons it is submitted that the order of the CIT(A) may be set aside and that of the AO restored. 2. The brief facts of the case are that the assessee is a partnership .....

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eared from time to time and filed the details, as called for. As stated by the AO in the assessment order, the assessee has declared long term capital gain on transfer / cancellation of booking rights in the property Kohinoor Mills No.3 . The AO observed that National Textile Corporation (Maharashtra North) Ltd (hereinafter called NTCL, for short), Mumbai was the wholly owned subsidiary of NTCL, New Delhi, who invited tenders for sale of the property, i.e. Kohinoor Mills No.3 at N.C. Kelkar Road .....

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development of property at Kohinoor Mills No.3 . The NTCL has accepted tender submitted by KPPL CTNL consortium. Further, as per the resolution passed at 195th meeting of the Board of Directors of NTCL held on 14- 09-2005, approved sale of said property to the purchaser, Kohinoor - CTNL consortium for a sale consideration of ₹ 421 crores. Later, as agreed between the consortium partners vide their new resolutions dated 16-07-2005 and 28- 06-2005 formed a SPV known as Kohinoor - CTNL Infras .....

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tion @Rs.36,000 per sq.ft and assured to pay a sum of ₹ 40 crores advance in due course. Out of the above ₹ 40 crores advance, agreed to pay a sum of ₹ 4 crores by 19-07-2005. Further, as per the understanding between the assessee firm and the SPV, the assessee has paid an amount of ₹ 40 crores over a period from August, 2005 to December, 2006. Subsequently, the assessee firm entered into a MOU on 05-10-2007 with Kohinoor-CTNL Infrastructure Co Ltd specifying terms and co .....

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; 78.85 crores for surrender of booking right in the proposed project. The assessee has computed long term capital gain from relinguishmet of booking rights in the property. 3. During the course of assessment proceedings, the AO issued a show cause notice to the assessee to explain computation of long term capital gain from relinquishment of booking rights in the project and also to furnish necessary evidence to justify computation of capital gain. In response to show cause notice, the assessee .....

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yed by KPPL vide letter dated 25-06-2005 confirming booking of 50,000 sq.ft. of building for a consideration @ ₹ 36,000 per sq.ft. The assessee further submitted that in pursuance of said agreement for purchase of booking rights, the assessee has paid a sum of ₹ 4 crores on 19-07-2005 and balance amount of consideration of ₹ 36 crores from August, 2005 to December, 2006. The assessee further submitted that it had entered into MOU on 05-10-2007 to ratify initial agreement betwee .....

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has been accepted by the seller. Therefore, the impugned asset is held for a period of more than 36 months and accordingly, it has rightly computed long term capital gain from surrender of booking rights in the property. In this regard, it has filed necessary correspondence between the SPV and the assessee and deed of cancellation dated 28-06-2008. 4. The AO, after considering necessary submissions of the assessee and also by taking into account the documents filed by the assessee during the co .....

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hase of booking rights by way of a letter dated 25-06- 2005, the sequence of events clearly establishes the fact that the assessee has got right over the property on 05-10-2007. The AO further observed that the date when the assessee has offer for purchase of property by way of letter dated 25-06- 2005, the seller did not even have right over the property which is evident from the fact that NTCL has accepted bid submitted by the consortium partners on 13-08-2005 which was further accepted by the .....

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operty. Therefore, he opined that the period of holding of the impugned asset from the date of MOU i.e. 05-10-2007 to the date of surrender , i.e. on 28-06-2008 is less than 36 months and accordingly, surplus from surrender of booking rights is assessable under the head short term capital gain. 5. The AO has extensively discussed the issue in his order and brought out clear fact that as on the date of offer letter i.e. on 25-06-2005, the consortium partners did not have any right in the proposed .....

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booking rights only on the basis of MOU on 05-10-2007 and prior to that date, the assessee in no way had any ownership of the booking rightly accordingly re-worked short term capital gain by taking into account date of acquisition of booking rights from 05-10-2007 to surrender of booking rights on 28-06- 2008 which is less than 36 months. 6. Aggrieved by the assessment order, the assessee preferred appeal before CIT(A). Before the CIT(A), the assessee reiterated its stand taken before AO to arg .....

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, 2006. The assessee further submitted that its offer of purchase has been accepted by the seller by way of letter and terms and conditions of agreement has been ratified by way of a MOU dated 05-10-2007, otherwise, the right and interest in the property has accrued to the assessee when its offer of purchase has been accepted by the seller. The assessee referring to MOU and letter addressed to M/s Kohinoor Properties Pvt Ltd dated 25-06-2005 submitted that it has finalized purchase of property, .....

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is rightly computed under the head long term capital gain. 7. The CIT(A), after considering relevant submissions of the assessee and also relying upon certain judicial precedents, observed that it was clear from the facts stated that the parties to the contract were contemplating for purchase and sale of property by way of an offer and acceptance which is evident from the fact that the assessee has offered to buy property by paying an initial deposit on 25-06-2005 which has been accepted by the .....

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tract conferred upon the assessee all legally enforceable rights in respect of the capital asset. The assessee has surrendered his booking right by a deed of cancellation on 28-06-2008 which resulted into long term capital gain as the period of holding of the capital asset in the hands of the assessee was more than 36 months. Accordingly, the assessee has rightly offered capital gain for taxation under the head Long Term Capital Gain . 8. The CIT(A) has extensively discussed the issue in the lig .....

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ct, to hold that unless the particular law requires a contract to be in a prescribed form, a contract could be deduced from behavior of the parties correspondence between them and even their conversations, etc. The CIT(A), after discussing the law of contracts and the provisions of Transfer of Property Act, 1882 came to the conclusion that contract / agreement had already come into existence on 25-06-2005 while making an offer of purchase of property. Therefore, once such agreement / contract fo .....

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the agreement itself, which, in the present case is 25-06-2005. With these observations, the CIT(A) directed the AO to assess capital gains under the head Long Term Capital Gain . Aggrieved by the order of CIT(A), the revenue is in appeal before us. 9. The Ld.DR submitted that the Ld.CIT(A) erred in holding that impugned asset is a long term capital asset and resultant capital gain is assessable under the head long term capital gain, even though the AO has clearly brought out facts which lead to .....

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submitted that as on the date of letter, i.e. on 25-06-2005, the seller not even had any right in the property and hence, under these facts and circumstances, it is highly incorrect and impractical to say that the parties have entered into a valid agreement for conveying title and interest in the property. The dates and sequence of events recorded by the AO from the document submitted by the assessee clearly indicates that the consortium partners have got confirmation from NTCL about its success .....

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erms and conditions of agreement to sell property. All these facts are subsequent to the date of assessee s letter dated 25- 06-2005. The AO has rightly taken holding period of the asset from the date of MOU i.e. on 5th October, 2007 and the date of surrender of booking rights on 28-06-2008 and the period of holding of asset from 05-10-2007 to 28-06-2008 is less than 36 months and accordingly, the AO has rightly assessed surplus from surrender of booking rights under the head short term capital .....

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o by the assessee with Kohinoor-CTNL Infrastructure Co Ltd, ignoring the fact that it had already entered into a valid agreement for purchase of property from one of the consortium partners, M/s Kohinoor Projects Pvt Ltd which fact has been confirmed by both the parties. The Ld.AR referring to the MOU dated 05-10-2007 submitted that it has entered into MOU only for the purpose of ratifying earlier terms and conditions of agreement dated 25-06-2005, but actual agreement took place between the par .....

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e relied upon the following case laws:- Anita D Kayani vs ACIT (2017) 163 ITD 451 (Mum) Ms. Madhu Karva vs CIT (2014) 363 ITR 54 (P&H) CIT vs Tata Services Ltd (1980) 122 ITR 594 (Bom) 11. We have heard both the parties, perused the material available on record and gone through the orders of authorities below. We have also carefully considered the case laws relied upon by the parties. The solitary issue that came up for our consideration is - whether, on the facts and in the circumstances of .....

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and surplus from transfer of booking rights is taxable under the head Long Term Capital Gains . According to the assessee, it has got valid title in the property on 25-06- 2005 by way of an agreement cum understanding with the seller of the property. The assessee further contended that it has made an offer for purchase of 50,000 sq.ft. in the proposed building to be constructed in Kohinoor Mill No.3 from consortium partners of Kohinoor Projects Pvt Ltd and Kohinoor CTNL, Mumbai and its offer has .....

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as been acknowledged by the consortium partners. The assessee further contended that though it has entered into a valid agreement for purchase of property on 25-06-2005, it has entered into a MOU on 05-10- 2007 with Special Purpose Vehicle formed by the consortium partners known as Kohinoor - CTNL Infrastructure Co Ltd only to ratify earlier terms and conditions in writing. But, undisputed fact is that it has got right over the property on the date of agreement, i.e. on 25-06-2005. Therefore, ho .....

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a valid MOU setting forth terms and conditions of conveying title and interest in the property on which date the right in the property accrued to the assessee. The AO further observed that the letter addressed by the assessee to Kohinoor Projects Pvt Ltd on 25-06-2006 is self serving document which does not have any legal support. The AO further observed that dates and events as per the document submitted by the assessee clearly proves an undisputed fact that as on the date of letter, the seller .....

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as been informed to the consortium partners on 13-08-2005. Till such time, the consortium partners did not even know whether they will be successful in their bid for purchase of property. Under these facts and circumstances it is highly impractical to accept the arguments of the assessee that it had entered into a valid agreement for purchase of property on 25-06-2005. The AO, further referring to the sale deed executed by NTCL in favour of Kohinoor-CTNL Infrastructure Co Ltd consortium on 11-10 .....

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ishment of asset or extinguishment of any rights therein. Sub section (v) of section 2(47) refers to provisions of section 53A of the transfer of Property Act, 1882 to define the term transfer which includes any transaction involving allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. As per the provisions of section 53A of the Transfer of Property Act, 1882, .....

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of section 2(47)(v) of the Income-tax Act, 1961 includes the term part performance referred to in section 53A of the Transfer of Property Act, 1882 for purpose of transfer of a capital asset. From the conjoined reading of section 2(47)(v) of The Income Tax Act, 1961 and section 53A of the Transfer of Property Act, 1882, for a valid conveyance of an immovable property, there should be an agreement in writing, signed by the transferor and transferee setting forth terms and conditions of Transfer o .....

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eate any interest in or charge on such property. Therefore, any agreement to sell that is not a registered deed of conveyance or deed of sale will fall short of the requirement of sections 54 and 55 of the Transfer of Property Act, 1882 and will, therefore, confirm no title and interest in an immovable property except to the limited right granted u/s 53A of the Transfer of Property Act, 1882. According to the Transfer of Property Act, 1882, an agreement for sale, whether with or without possessi .....

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eror and transferee and the same should be registered under the Registration Act, 1908. Unless and until the agreement to sell is not registered under the Registration Act, 1908, the rights and interest in the property will not be transferred to the transferee. 14. In the above legal background, let us examine the facts of the present case. In the present case, the assessee claimed to have entered into a valid contract for sale / agreement to sell by way of a letter addressed to one of the conso .....

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o purchase 50,000 sq.ft. building to be constructed at Kohinoor Mill No.3 for a consideration @Rs.36,000 per sq.ft. and assures to pay a sum of ₹ 40 crores in advance. The letter further states that out of the above, a sum of ₹ 4 crores should be paid on or before 19-07-2005. The assessee also relied upon letter written by Kohinoor Projects Pvt Ltd on 25-06-2005 accepting offer of the assessee for purchase of property by stating that they confirm the arrangement of purchase of proper .....

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d by both the parties. The only dispute is with regard to the date of acquisition of booking right and period of holding of the right. The assessee claims that it has got right over the property from 25-06-2005 when it made an offer for purchase of property by way of a letter addressed to Kohinoor Projects Pvt Ltd. The AO claims that the assessee has got right over the property on 05-10-2007 when a valid MOU was entered into between the assessee and the SPV setting forth terms and conditions of .....

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nswered is whether the assessee has got right over the property as on 25- 06-2005 or on 05-10-2007. The assessee has filed paper book containing various details filed before the lower authorities. The paper book filed by the assessee contains letter addressed to Kohinoor Projects Pvt Ltd and its acceptance letter written by consortium partners. The assessee also filed copy of MOU dated 05-10-2007 and cancellation of booking rights deed dated 28-06-2008. On verification of the details filed by th .....

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subject to receipt of payment on stipulated date. Except these two simple facts, the offer letter and acceptance letter do not contain anything about the description of property, terms and conditions of agreement. We also have gone through the MOU executed by the assessee on 05-10-2007. In the MOU, though it is not registered, it contains all valid terms and conditions of an agreement to sell. In the said MOU, both the parties have deduced their terms and conditions in writing and also signed b .....

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ng. We further observe that the consortium partners have formed an SPV known as Kohinoor-CTNL Infrastructure Co Ltd subsequent to the confirmation received from NTCL. NTCL has executed a valid sale deed in favour of the SPV on 11-10-2005 which is registered with the Sub Registrar. After receipt of valid title in the property, Kohinoor-CTNL Infrastructure Co Ltd has entered into a valid MOU setting forth terms and conditions of the property and agreed to convey title in the property in favour of .....

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her was of the opinion that right / interest in an immovable property could accrue only by way of an agreement embedding conscious ad edem. We further opine that booking right in flat / apartment or a property shall be treated as acquired upon execution of buyer s agreement with the seller and not on the date of booking confirmation letter for provisional allotment of flat. 17. Coming to the case laws relied upon by the assessee. The assessee has relied upon plethora of judgements, including the .....

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case, the Tribunal came to the conclusion that registration of sale deed date is not relevant for the purpose of computing holding period of the asset, if a valid allotment letter is issued, then date of holding of the asset should be considered from the date of allotment letter. The fact of case before co-ordinate bench is altogether different from the facts of present case, as in the case of Anita. D. Kanjani (Supra), allotment letter makes a mention of the identity of the property by unit no. .....

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et is capital asset within the meaning of section 2(14) of the Act or not, but not holding period of asset within the meaning of section 2(42A) of the Act. The Hon ble High court after considering facts held that right to acquire a plot of land is capital asset within the meaning of section 2(14) of the Act. In this case, there is no dispute with regard to nature of asset. The assessee itself accepted booking right is a capital asset. Therefore, the case law relied upon by the assessee is not ap .....

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etter was issued. In this case, the assessee addressed a letter to the prospective buyer of the property, on which date the seller does not even know whether he would succeed in bidding. Therefore, we are of the view that the case law relied upon by the assessee are not applicable to the facts of present case and hence, not followed. 18. Coming to the decision of Hon ble Delhi High Court, in the case of Gulshan Malik vs. CIT (2014) 223 Taxmann 243 (Delhi- HC). The Hon ble Delhi High Court has co .....

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led by the assessee in SLP No. 30670/2014 dt. 26-10-2015, and upheld finding of Delhi High Court. Though simple dismissal of SLP does not amount to law laid down on the issue, we prefer to follow Hon ble Delhi High Court in the case of Gulshan Malik vs. CIT(Supra), as the Hon ble Court considered the law laid down by Hon ble Punjab & Haryana High Court in the case of CIT vs. Ved Prakash & Sons (HUF)(1994) 207 ITR 148. The relevant portion of order of Delhi High Court is reproduced below: .....

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l; The reference to acquisition 'by way of an agreement or any arrangement or in any other manner whatsoever' establishes that it is not conveyance of property or the doctrine of part performance (enacted through section 53A of the Transfer of Property Act) which results in enforceable rights, for the purposes of the Act. • The scheme puts it beyond doubt that even rights or interests in a property are kinds of property that are transferable capital-assets. Thus, there is no doubt t .....

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y way of an agreement embodying consensus ad idem. The nature of the right sought to be transferred here is the right to purchase the apartment and obtain title, termed 'booking rights'. Only that agreement which intends to convey these rights according to both parties can be considered as the source of accrual of rights to the assessee. • The confirmation letter dated 6-8-2004 specifically states first, that no right to provisional/ final allotment accrues until the buyer's agr .....

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letter. These rights may only be located in buyer's agreement, and thus, the date of acquisition of the capital asset must be considered the date of signing of said agreement, i.e. 4-11-2004. [Para 8] • These rights were transferred by.the assessee on 2-11-2007. Thus, the capital asset in the form of these rights was held for a period of 35 months and 28 days,. La, a short-term capital asset thus rendering the profits from the transfer-of-this capital asset taxable as short-term capita .....

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a right or interest in any immovable property accrue only by way of an agreement to sell, but not on date of allotment of booking right. The relevant portion of order is extracted below:- 2.2. We have cons idered the r ival submis s ions and perused the material available on record. The facts, in brief, are that the assessee declared income of ₹ 96,60,860/- in its return filed on 13/10/2010 (Assessment Year 2009-10). Likewise, for Assessment Year 2010-11, the assessee declared nil income i .....

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e assessee booked two flats in Financial Year 2004-05, registered in Financial Year 2007-08 and sold on in December, 2009. The assessee made initial payment of ₹ 3,08,810/- on 05/03/2005 and further payment was made on 14/10/2009. The assessee made total payment of ₹ 68,78,700/- and ₹ 75,06,200/-, respectively of the flats. The assessee never occupied the flats. The stand of the Revenue is that as per transfer of Property Act, section 53A, possession is necessary for ownership .....

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erty or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that the contract, though required to be registered, has not been registered, or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the .....

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The aforesaid section, if analyzed, it speaks about taking possession of the property or any part thereof or the transferee, being already in possession, whereas, in the present cases, no possession was taken by the assessee and only rights were sold. The assessee made the payments in 2009 and thereafter he got the rights to sale the property, therefore, prior to that he was having no right to sale the same. The reply of the assessee vide letter dated 12/03/2013 (reproduced in the assessment or .....

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flats was less than three years. Our view find support from the decision, on identical facts and the ratio laid down therein by Hon'ble Delhi High Court, in the case of Gulshan Mallik vs CIT (2014) 43 taxman.com 200(Del.)/(2014) 223 taxman 243(Del.). The relevant portion of the same is reproduced hereunder for ready reference and analysis:- This is an appeal filed against the order of the Income Tax Appellant Tribunal ( ITAT ) in ITA No. 161/Del/2012 dated 27.02.2013, which upholds the orde .....

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or interests in the same. The builder DLF Universal Limited ( DLF ) issued a letter dated 6.08.2004 provisionally allotting the apartment and two parking spaces, stating specifically the receipt of ₹ 2,00,000/- (Annexure 3). Consequent to this, regular payments were made per the payment plan of the builder. A buyer's agreement was executed on 4.11.2004 between DLF and the allottees i.e. the appellant and his wife. Per the payment schedule, a total payment of ₹ 87,12,500/- was ma .....

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iled return of income on 31.3.2009 for the assessment year 2008-2009, with income declared to be ₹ 3,84,874/-. In the computation of income, the appellant had declared a long term capital gain of ₹ 31,35,740/- on the sale of booking rights/extinguishment of rights in the apartment. An exemption was claimed under Section 54 of the Act, 1961 as the same was invested in purchase of another apartment in June 2008. 3. After the return was processed under Section 143(1) of the Act and the .....

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AO before CIT-A was dismissed by an order dated 25.11.2011, on the grounds that the rights in the apartment accrued to the appellant only when the apartment was purchased by the agreement dated 4.11.2004. It was also noted that only rights in the property and not title were transferred vide the agreement of 2.11.2007 as the assessee never had possession of the apartment. The assessee's second appeal before the ITAT was also dismissed vide order dated 27.02.2013 on the ground that no rights .....

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in a period of 36 months thus rendering the profits from the sale taxable as short-term capital gains, which do not qualify for the deduction under Section 54. 4. The question that arises for consideration is whether any right accrued to the assessee by way of the application for allotment that can be considered a capital asset; this would determine whether the date of application for allotment of the apartment or the date of the buyer's agreement ought to be considered the date of acquisiti .....

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sset, held for a period of 39 months and 2 days. Alternatively, the appellant submits placing reliance on CIT v. Ved Parkash & Sons (HUF) [1994] 207 ITR 14873 Taxman 70 (Punj. & Har.) that rights in the apartment were acquired on the date of receipt of allotment letter i.e. 6.8.2004, by which the apartment was provisionally allotted to him, which rights were sold on 2.11.2007 thus making his right in the apartment a long-term capital asset. The two grounds for this submission are first, .....

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learned ITAT member who held that booking rights accrued in the assessee only once the buyer's agreement of 4.11.2004 was signed, thus making the profits from sale taxable as short-term capital gains. 6. It would be appropriate to extract Section 2(14), 2(42A), 2(47) here in relevant part. Section 2 of the Act reads: '2. In this Act, unless the context otherwise requires, (14) capital asset means property of any kind held by an assessee, whether or not connected with his business or pro .....

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to, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ; or (iva) the maturity or redemption of a zero coupon bond ; or (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a .....

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anner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India .' 7. It is clear that a capital asset under the Act is property of any kind that is held by the asse .....

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ther manner whatsoever establishes that it is not conveyance of property or the doctrine of part performance (enacted through Section 53A of the Transfer of Property Act) which result in enforceable rights, for the purposes of the Income Tax. The scheme of the Act puts it beyond doubt that even rights or interests in a property are kinds of property that are transferable capital assets. Thus, there is no doubt that booking rights or rights to purchase the apartment or rights to obtain title to t .....

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uently confirmed by the ITAT by additionally relying on the receipts at the time of confirmation of allotment. Thus, in these facts, the question of whether the booking rights are a transferable capital asset is not contentious. The judgment in Ved Parkash (supra) is also consequently of no assistance in this matter since the reasoning therein turns on whether capital asset refers only to title to property as opposed to other rights/interests in the property. 8. This being the case, the only que .....

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nd obtain title, termed booking rights . Only that agreement which intends to convey these rights according to both parties can be considered as the source of accrual of rights to the assessee. The confirmation letter dated 6.8.2004 (Annexure 3) specifically states first, that no right to provisional/final allotment accrues until the Buyer's Agreement is signed and returned to the builders and second, that no right to claim title/ownership results from the confirmation letter itself. Thus, i .....

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ate of signing of said agreement i.e. 4.11.2004 9. These rights were transferred by the assessee on 2.11.2007. Thus, this Court is of the opinion that the capital asset in the form of these rights was held for a period of 35 months and 28 days, i.e. a short-term capital asset thus rendering the profits from the transfer of this capital asset taxable as shortterm capital gains. 10. Ved Parkash (supra), in any event, can be distinguished from the facts in this case. In Ved Parkash (supra), the ass .....

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sessee became the titleholder to the property only once all the instalments were paid, and that title to the property was the only capital asset that could be transferred. It was in the context of these arguments that the Court held first, that it is incorrect to say that the assessee had no right or interest in the property until the completion of payment of all instalments under the agreement as the assessee was a beneficial owner from the date of signing the agreement, having been put in poss .....

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terest was conveyed to the assessee in the instant case when the application for allotment was made/confirmation letter was received. The agreement to sell was considered to be the source of a beneficial interest to the assessee in Ved Parkash (supra) only because the right of possession had been transferred to the assessee along with the agreement to sell. There cannot be any parity between the allotment application/confirmation letter in the instant case and the agreement to sell in Ved Parkas .....

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in Para-8 onwards, clearly held as under:- 8. This being the case, the only question that arises for consideration is whether the booking rights to the apartment accrued to the assessee on the date of application for allotment/confirmation of allotment or on the date of execution of the agreement to sell i.e. the buyer's agreement. This Court is of the opinion that a right or interest in an immovable property can accrue only by way of an agreement embodying consensus ad idem. The nature of t .....

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t to claim title/ownership results from the confirmation letter itself. Thus, it is clear that the Builders do not intend to convey any right of provisional/final allotment or any right to claim title/ownership under the confirmation letter. There being no intention to convey rights in this document, it would be impermissible for this Court to find that the right to obtain title/ booking rights emanated from the confirmation letter. These rights may only be located in the Buyer's agreement, .....

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an be distinguished from the facts in this case. In Ved Parkash (supra), the assessee sought to claim that the date of acquisition of the capital asset was the date of entering into the agreement to sell with the builder, by which the assessee had also received possession of the property. The Department, on the other hand, claimed that according to the conditions of the agreement, no right, title or interest in the property would be conveyed to the assessee until all instalments due and payable .....

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beneficial owner from the date of signing the agreement, having been put in possession of the property as of that date and second, that Section 2(42A) of the Act, in any event only uses the term held and not owned , thus indicating that a capital asset need not only refer to full title over any property. Ved Parkash (supra) can thus be distinguished on two grounds, first, that in the instant matter, booking rights are sought to be sourced in the allotment application/confirmation letter and not .....

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/confirmation letter in the instant case and the agreement to sell in Ved Parkash (supra), since the confirmation letter specifically states that no right of provisional allotment/final allotment will result from it to the assessee. It is also noted that the assessee challenged the aforesaid decision of Hon'ble Delhi High Court before Hon'ble Apex Court, wherein, the SPECIAL LEAVE TO APPEAL (C) NO(S). 30670/2014 was dismissed, meaning thereby the case was decided in favour of the Revenue .....

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on'ble Delhi High Court affirmed the decision of the Tribunal considering various aspects including section 2(42A) of the Income Tax Act, 1961, section 2(14), 2(47) along with explanation. The Hon'ble Delhi High Court considered the question whether the booking rights to the apartment accrued to the assessee on the date of application for allotment/confirmation of allotment or on the date of execution of the agreement to sale i.e. buyers agreement . The Hon'ble Court held that a righ .....

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assessee, are concerned (made available in the paper book) since, either the facts are different and no decision from Hon'ble Apex Court was cited, whereas, as mentioned earlier, the SLP against the decision from Hon'ble Delhi High Court in the case of Gulshan Mallik vs CIT (supra) was dismissed by Hon'ble Apex Court and further the decision of Hon'ble Delhi High Court is dated 14/03/2014, whereas, the decision in the case of Ved Prakash & Sons (HUF)(supra) was reported in 1 .....

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or interest in the immovable property, unless it is conveyed through a valid agreement to sell specifying terms and conditions though it is not registered. In this case, the letter addressed by the assessee is only a self serving document which does not have any legal sanctity. On the other hand, the evidence relied upon by the AO, i.e. the MOU is a valid document conferring title and interest in the property in favour of the assessee, which happened on 05-10- 3007, but not on 25-06-2005. We fur .....

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lance amount has been paid by some third parties. The assessee further claims that it had taken loan from some parties and they have directly paid to the seller for which it has paid interest. Assuming for a moment, but not accepting, even if date of first payment is considered for the purpose of reckoning holding period, the first payment was made on 19-7-2005 and if that date is considered, holding period of asset is still less than 36 months. Therefore, we are of the view that the assessee ha .....

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; 2,93,67,955 on loan taken against security of fixed deposit. During the course of assessment proceedings, the AO noticed that the assessee has kept fixed deposit of ₹ 15 crores in CKP Co-operative Bank. However, no interest income has been offered to tax under the head Income from other sources . Therefore, the assessee was called upon to furnish necessary details of fixed deposits and related interest income earned from such deposits. In response to query raised by the AO, the assessee .....

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in property development business and the firm derives benefit from investment made in its associate concerns. The assessee further submitted that it also received interest income of ₹ 2,93,67,955 on fixed deposits which has been netted against interest paid on loan and difference of ₹ 5,69,790 has been debited to the P&L Account. The assessee further contended that its interest payment satisfies the requirements of section 36(1)(iii) and deserves to be allowed. In this regard, t .....

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he head interest on fixed deposit is taxable under the head Income from other sources and not as Income from business or profession . Since, the assessee has not paid interest on loan borrowed against security of fixed deposit towards its business activity, netting of interest earned on fixed deposit cannot be permitted against interest paid on funds borrowed against security of fixed deposit. Aggrieved by the assessment order, the assessee preferred appeal before CIT(A). 22. Before CIT(A), the .....

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herefore, the AO was incorrect in denying netting off benefit. The CIT (A), after considering the relevant submission of the assessee and also relying upon certain judicial precedents observed that submissions of the assessee have been devoid of any merits. The interest income is not a business income and has to be assessed under the head Income from other sources unless the business of the assessee is lending of money as decided by the various judicial pronouncements. The assessee has claimed i .....

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derive commercial benefit, assessee failed to prove any commercial expediency in advancing loans to its sister concerns. Therefore, the AO was right in denying netting off of interest paid against interest earned on fixed deposit and charging to tax interest income under the head Income from other sources . Aggrieved by the order of CIT(A), the assessee is in appeal before us. 23. We have heard both the parties and perused the material available on record. The fact with regard to interest incom .....

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r a short period. Therefore, the interest income from fixed deposit is assessable under the head, Income from other sources . Though, the assessee claims to have paid interest to bank for loan taken against security of fixed deposit, loan proceeds have been utilized for advancing interest free loans to sister concerns. Therefore, the assessee is not eligible for deduction towards interest paid on loan against interest earned from fixed deposit. 24. The assessee has earned interest income of S .....

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free advances to sister concerns and associates. This fact has been admitted by the assessee before the lower authorities. Though the assessee claims to have advanced loans to sister concerns out of commercial expediency failed to prove any commercial expediency in advancing loans to sister concerns. Therefore, we are of the view that the AO was right in denying netting off of interest paid to bank for loan taken against security on fixed deposit against interest earned from fixed deposit from t .....

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s of the present case. The CIT(A), after considering relevant submissions, has rightly upheld addition made by the AO. We do not find any error or infirmity in the order of CIT(A); hence, we are inclined to uphold the findings of the CIT(A) and reject the ground raised by the assessee. 25. Coming to the additional ground raised by the assessee. The assessee has filed a petition for admission of additional ground of appeal by raising a ground seeking set off of interest received from loans and ad .....

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27. After hearing both the sides, we find that additional ground raised by the assessee making an alternative claim for setting off of interest received from loans against interest paid to the bank for loan taken against security deposit emanates from the facts already on record. Therefore, we deem it appropriate to admit additional ground raised by the assessee and decide to adjudicate on merits. 28. The Ld. Sr Counsel for the assessee submitted that the assessee has earned interest income of & .....

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erial available on record, we find force in the arguments of the assessee for the reason that if at all any interest is charged on loans and advances from the parties and the same is part of receipts of the assessee for the relevant financial year, then the same needs to be set off against interest paid to the bank on loan borrowed against security deposit, if there is a direct nexus between loans borrowed from bank and loans and advances to other parties. Since, the assessee has raised the issu .....

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lt, additional ground raised by the assessee is allowed for statistical purpose. 31. The next issue that came up for our consideration from revenue appeal is administrative and other expenses allowed by the CIT(A). During the appellate proceedings, the assessee has raised an additional ground challenging the action of the Ld.AO disallowing the claim of expenditure made by the assessee on the ground that the assessee has not carried out any business activity and also not generated any income from .....

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that expenditure incurred by the firm is in the nature of general administrative and overhead expenses, which are necessarily to be incurred for keeping corporate status of the assessee, even if the assessee does not carry out any business activity for the year under consideration. The assessee further contended that it is in the business of project management services, however, due to adverse business conditions, could not be able to generate any revenue for the year under consideration. But, m .....

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receipts during the period cannot lead to an inference that there is no business activity. The relevant portion of order of the CIT(A) is extracted below:- 75. I have perused the assessment order passed by the Assessing Officer and the written submissions filed by the AR of the appellant carefully. 76. Admittedly, the appellant has not carried out the regular business activity of providing projects management services during the period under consideration. But at the same time, it cannot be pre .....

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iness activity. The infrastructure of an office has to be maintained and the connected minimum expenditure will have to be incurred in order to ensure that once the efforts of the management in obtaining business fructify, services can be rendered. There is no finding given by the Assessing Officer that the business of the appellant nature has been discontinued, his only observation is that there are no receipts in this year and no services were rendered in this year. 78. The fact of there being .....

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are dealing business, merely because there are no business transactions in the relevant previous year cannot be reason enough to come to the conclusion the business has come to an end. It could not thus be said; as was the case before the Hon'ble Madras High Court, that the assessee had completely abandoned or closed the business forever Unless the business is abandoned or closed and even if business is at a dormant stage waiting for proper market conditions to develop, the expenditure incur .....

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