TMI Blog2021 (6) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... ir Singh, VP And Hon ble Shri Manoj Kumar Aggarwal, AM For the Assessee : Written Submissions dated 18/03/2021 For the Revenue : Shri Bharat Andhale-Ld. Sr. DR ORDER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2014-15 contest the order of Learned Commissioner of Income-Tax (Appeals)-53, Mumbai [CIT(A)], dated 14/06/2019 in the matter of assessment framed by Ld. Assessing Officer (AO) u/s 143(3) on 20/12/2016. The grounds raised by the assessee read as under:- 1. The Id. CIT(A) erred in upholding the action of the AO in adding a sum of ₹ 618000/- u/s 43CA of the Act to the consideration received in respect of agreements to sale executed during the year in respect of redevelopment project under construction. 1.i. In doing so, the Id. CIT (A) did not appreciate that the price in respect of the additional area sold to the existing members over above the entitled area was prefixed haying regard to the development agreement dt. 6.03.2011 which was duly registered with the sub-registrar of Assurances, Mumbai and the said price was more than the ready reckoner rate prevailing on the date of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above the area agreed to be allotted to them in lieu of existing flat, the same would be given to them @₹ 15000/- per square feet of carpet area. The additional area that could be opted for by the members and rate per square feet of the additional area was fixed in the registered development agreement. During this year, the assessee sold additional area to 11 members for aggregate sale consideration of ₹ 224.70 Lacs. However, the stamp duty value of the same aggregated to ₹ 230.88 Lacs which led Ld. AO to invoke the provisions of Sec.43CA against the assessee to make impugned additions of differential amount i.e. ₹ 6.18 Lacs. The details of 11 flats so sold during the year has been enumerated in para 5.1 of the order. All these flats were situated on 5th floor. 2.2 The assessee submitted that it had agreed to sell the additional area in the flats during financial year 2010-11. At that time, stamp duty reckoner value was ₹ 9,700/- per square feet whereas the additional area was sold at much higher price of ₹ 15000/- per square feet. The Stamp duty valuation would vary from year to year but the agreement value could not be changed. The provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bclause (c) of Clause-12. Thus, quite clearly the additional area has been sold by the assessee pursuant to the development agreement which has been entered into by the assessee during financial year 2010-11 which is prior to introduction of Sec.43CA. The provisions of Sec.43CA has been inserted by the legislatures only with effect from 01st April, 2014 and the same would not apply to any such agreements as entered into by the assessee in earlier years as held by Hon ble Bombay High Court in Pr. CIT V/s Swananda Properties (P.) Ltd. {2019 111 taxmann.com 94 (Bombay) dated 09/09/2019} . The Hon ble Court declined to admit the question of law as raised by the revenue with following observations: - Re. Question (b) 12. The Respondent- Assessee is a Developer. He is in the business of real estate development. The flats sold by the Respondent- assessee are stock-in-trade. The CIT (A) by his order passed the best judgment assessment and noted that the sale consideration of twelve flats in the project has been suppressed. According to him, the market rate nearest to that date is ₹ 8,992/- per sq.ft. and, thus, reassessed the sale of each of the twelve flats. This basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. This section 43CA of the Act finds a place as a part of Chapter IVD - Profits and gains of business or profession. Therefore, with effect from 1st April 2014 the stamp duty valuation of assets sold could be taken as value of consideration. Our above view that section 50C of the Act has no application to value stock in trade is also a view taken by Allahabad High Court in Commissioner of Income Tax v. Ken Construction and Colonizers (P.) Ltd. (2012) 208 Taxman 478/20 taxman.com 381. Similarly the Madras High Court in CIT v. Thiruvengadam Investments (P.) Ltd. (2010) 320 ITR 345 has also held that section 50C of the Act cannot be invoked to arrive at full consideration of sale of business asset. We see no reason not to adopt the views of the above two High Courts to the present facts. (Emphasis Supplied) Therefore, section 43CA cannot be made applicable to the facts of the present case. By the plain language of this provision it is not retrospective. Thus, there is no statutory provision based on which the stamp duty valuation could have been made a basis in the present case. 14. The Division Bench of this Court in the case of Zain Constructions v. ITO [20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erely on suspicion. It is not the case of the Revenue that the Respondent made secret profits out of sale of the twelve flats. 17. The Supreme Court has observed in the case of CIT v. A. Raman Co. [1968] 67 ITR 11 that the law does not oblige a trader to make maximum profit, he can make, out of his trading activity. Income on which he can be taxed is only the income he has earned. So also recently, the Supreme Court in the case of S.A. Builders v. CIT [2007] 158 Taxman 74/288 ITR 1 has observed that no businessman can be compelled to maximize his profits. Therefore, in view of the above, this question as proposed also does not give rise to any substantial question of law. Thus not entertained. 18. The appeal is dismissed. The Hon ble Court has held that the provisions of Sec.43CA would not have retrospective application and accordingly, do not apply to agreement executed prior to its introduction. The ratio of this decision is squarely applicable to the case of the assessee. Therefore, the impugned additions could not be sustained in the eyes of law on this point alone. We order so. Consequently, the other arguments made by the assessee has become merely a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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