9911796707
TMI Blog2019 (4) TMI 1791X X X X Extracts X X X X X X X X Extracts X X X X ..... with the TDS provisions." 3. Briefly stated, the assessee company is engaged in the business of L.T. Insulators, sale/purchase of land and development of properties. The assessee filed return of income for AY 2010-11 declaring total income at Rs. Nil. The return filed by the assessee was subjected to scrutiny assessment. In the course of assessment, the AO disputed the return of income and made addition of Rs. 3,13,18,468/- against sale of land on the ground that the development agreement executed by the assessee for certain parcel of land held by it in favour of the developer M/s. Balaji Associates for construction of residential/commercial unit as transfer under s.2(47) of the Act and thus chargeable to capital gain. The AO also made disallowance of consultancy fees amounting to Rs. 4,50,000/- and added the same to the total income of the assessee. 4. Aggrieved, the assessee preferred appeal before the CIT(A). It was vehemently contended with reference to the various clauses of the development agreement that the developer do not have any domain over the land and it is the prospective buyer who buys specified share of undivided interest in the land from the owner and therefore n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant submitted that as per development agreement the Appellant has booked sale value of land in the profit and loss account as and when the units are booked in favour of proposed purchaser and accordingly it has shown the total sale value of Rs. 3,22,83,698/- in different year which is more than Jantri rate of Rs. 2,86,02,600/- as adopted by AO on the basis of development agreement." 5. The CIT(A) on consideration of submissions made adjudicated the issue in favour of the assessee as under: "5.3 I have carefully considered argument of the Appellant and observation of AO made in the assessment order. The AO has while passing Assessment order made addition as profit on sale of land applying provisions of section 2(47) r.w.s 53A of Transfer of Properties Act, 1882 on the ground that the Appellant has transferred possession of land by making development agreement Appellant has during the course of appellate proceeding explained the terms of development agreement in details and submitted that there is no transfer of possession of land as held in the Assessment order and further emphasis on the argument that the land being held as stock in trade the provisions of section 2(47) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion being part of stock in trade the argument of the appellant is found to be acceptable. The provisions of section 2(47) are applicable only to the capital asset. In the present case of the appellant land for development agreement is held as stock in trade by the appellant and hence the provisions of section 2(47) of the Act becomes irrelevant. (iii) The AO has while passing assessment order erred in considering sale value of Rs. 3,86,02,600/- as per development agreement as full value of consideration received and accordingly observed that the Appellant is required to tax entire profit on sale of land as the possession of land is transferred to developer. On consideration of entire facts it is observed that as per clause (f) of the development agreement the Appellant is required to collect price of land from developer as per Jantri Rate from time to time as and when the construction is completed. Further as per condition 2 of development agreement consideration of Rs. 1 Crore is to be paid as and when the work is progressed. Thus the Appellant was authorized to collect the consideration from time to time as and when the construction is completed by the developer. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed consideration of development agreement on proportionate basis as and when the sale deed is executed in favour of proposed buyers as the transfer of proportionate land took place only when the appellant transfers the constructed property/ flat by way of sale deed. The argument of the appellant is squarely covered by the decision of Hon'ble Chennai Tribunal In case of R. Gopinath (HUF) v. Assistant Commissioner of Income-tax [2010] 133 TTJ 595(CHENNAI) "Held that the possession was handed over for carrying out the; construction work by the developer and there was no other document except the development agreement which transferred the title of the-property to the developer. In the absence of the transfer of the title of the property and any consideration at the time of development agreement, the handing over of the possession was merely a temporary measure (or carrying out the construction work by the developer and the exclusive possession of the property in legal sense remained with the assessee which was finally handed over at the time of execution of the sale deed of the constructed flats by the assesses, The assessee had executed all the sale deeds for transfer of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ultimate flat purchasers at a later date on fulfillment of various conditions and on receipt of aggregate consideration as per the agreements executed in this regard. The learned AR for the assessee submitted that the developer could not part with the land without the concurrence and approval of the assessee. 8. We have carefully considered the rival submissions. We find that the CIT(A) has correctly applied the law in the facts of the case. As per the terms of the development agreement, there is no transfer of possession of land as noted by the CIT(A). Secondly, the land was held as stock and trade and therefore provisions of Section 2(47) of the Act relating to capital asset would not apply at all. It is seen from the order of the CIT(A) that as per the development agreement, the assessee was required to collect price of land from the developer from time-to-time when the construction is completed. The CIT(A) has also observed that assessee has recorded income as per accounting standard concerning real estate development. We do not see any infirmity in the process of reasoning arrived at by the CIT(A) and consequently, endorse it in entirety without repeating the same. 9. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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