TMI Blog2021 (12) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... at, assessee had an increase in work in progress. On perusal of the balance sheet for year under consideration placed in the paper book, we note that, no work in progress is accounted for. Under such circumstances, we do not find any reason to allow entire administrative expenses claimed by assessee. Whatever has been allowed by the Ld. CIT(A) is justifiable. Addition of direct expenses - Whether payments were relating to transfer of capital asset? - HELD THAT:- Clause 3 of the memorandum allows assessee to undertake construction activities. Assessee used to have clubhouse business which could not run well in the past. Assessee had to shut down the business as there was a lull period. It was during this period that, the assessee entered into real estate construction. This led to the JDA with M/s. Palma Developers Ltd. The expenses incurred are towards development of the land as per JDA. Under such circumstances, in our view these expenses pertained to the activities carried on by assessee during the relevant period.Accordingly these expenses are to be allowed as business expenditure. Computation of capital gains on the constructed area falling into assessee's share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guments advanced by the Ld. AR under such peculiar facts that emanate from records that assessee had only granted right to enter the land for purposes of developing. Respectfully following the observation of Hon'ble Supreme Court in the case of CIT vs. Balbir Singh Maini [ 2017 (10) TMI 323 - SUPREME COURT] and TK. DAYALU [ 2012 (6) TMI 405 - KARNATAKA HIGH COURT] do not find any infirmity in the view taken by Ld. CIT(A). - Decided against assessee. Taxability of constructed area to be received by assessee - AO noted that assessee has not declared the capital gains of the constructed area that is receivable and therefore brought to tax by applying cost of construction at ₹ 1880/- per square feet as contemplated to be disclosed by M/s. Plama Developers Ltd - HELD THAT:- On perusal of various supplemental agreement entered into by assessee, there is a mention of additional FAR that may be available, the actual constructed area which will be handed over to the assessee by the developer is not known for the year under consideration. We therefore of the opinion that acted constructed are cannot be determined, as they are non-existent as on the date of entering into J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 46,60,463/- by stating that, the said expenditure is relating to transfer of Capital Assets to Plama Developers Ltd. 4. The learned CIT(A) erred in confirming the capital gains on refundable deposit by treating it as non-refundable deposit and confirming the same as full value of consideration for the purpose of capital gains. 5. The learned CIT (Appeals)-2, Panaji has erred in law in coming to the conclusion that, in view of the judicial decisions of the Hon'ble Jurisdictional High Court in the case of CIT Vs. Dr. T.K. Dayalu (292 Taxman 531) as well as following decisions of other Hon'ble Courts, date relevant for attracting capital gains having regard to the definition u/s. 2(47)(v) of the Income tax Act, 1961 r.w.s. 53 of Transfer of Property Act is the date, on which possession is handed over to the developers. The said decisions are not at applicable to the Appellant's case. i) Chaturbhuj Dwarakadas Kapadia Vs. CIT ( 260 ITR 491) (Mumbai) ii) Authority of Advance Ruling in Jasbir Singh Sarkaria in RC Akkineni Rajeshwara Rao (ITA 5341I-IYD12014), dated 13.4.2012. 6. The Appellant craves leave to add, amend or alter any of the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filing appeal by assessee. The Ld. AR submitted that impugned order was received by assessee on 31/03/2017 however the appeal could be filed only by 14/08/2017. 2.1. It has been submitted that the director of the company was not keeping well and was admitted at the hospital for hernia surgery and thereafter was on bed rest. The director of the assessee has also filed an affidavit under oath dated 17/02/2018 in support of the above. The Ld. AR thus prayed for condonation of the delay in filing the present appeal. 3. On the contrary the Ld. Sr. DR vehemently objected for the delay to be condoned. 3.1. We have perused the submissions advanced by both sides in light of records placed before us. 3.2. We note that there was a genuine reason because of which assessee could not file the present appeal within the period of limitation. In the interest of Justice and to render justice to further substantial cause, we condoned the delay of 79 days in filing the present appeal before this Tribunal. Accordingly the application for condonation of delay dated 20/02/2018. Brief facts of the case are as under: 4. The assessee is a private limited company and was engaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... branch and dated with the authority to date the same after planners sanctioned in the terms of JDA and to be delivered to the owner after that date without reference to the developer. d) ₹ 1 crore - at the time of me Pooja which have not been later than 30 days from the date of plan sanctioned. e) ₹ 10.5 crores, (in monthly installments of rupees one crore each and last being ₹ 15 lakhs from the date of Bhumi Puja) 4.3. The Ld. AO also noted that though the JV agreement was signed in 2006 and subsequently in 2008, the possession of the property was taken over by the developer after approval of the plan for building that is December 2009. According to Ld. AO, the liability of capital gains arising out of surrender of the land by assessee, to be taxed in the financial year 2009-10 relevant to assessment year under consideration. 4.4. The Ld. AO noted that, assessee as well as the developer M/s. Plama Developers Ltd., had not filed proper return of income disclosing true and correct income and source of investment in the project. Hence a survey under section 133 of the Act, was conducted in the office premises of the assessee on 11/01/2013, and searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onable administrative and financial expenditure incurred by assessee. 5.3. The Ld. CIT(A) decided the issues as under: 5.3. Now, I come to the quantum of allowance of expenditure. As seen from the P L Account, the administrative expenses claimed are ₹ 30,87,571/-, which has increased from ₹ 27,37,692/- in the immediately preceding assessment year. The AR of the appellant has not explained the need of incurring additional administrative expenses during the previous year relevant to the assessment year in appeal. In deciding the appeal of A.Y. 2009-10, I have directed the AO to allow administrative expenditure of ₹ 12,00,000/-. Now, considering the inflation aspect and also considering the fact that appellant has executed the JDA during the previous year relevant to the assessment year in appeal, it would be reasonable to allow an expenditure of ₹ 15,00,000/-, which in my opinion, is sufficient for running a company of the appellants size. Thus, the disallowance of administrative expenditure to the tune of ₹ 15,87,571/- is confirmed. 7.13. Thus, in case of deemed transfer of land by virtue of JDA, the logical consideration for such land tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y adjudication. 9. Ground No. 2 is in respect of disallowance of administrative expenses to the extent of ₹ 15,87,571/-. 9.1. We note that Ld. CIT(A) restricted the disallowance to the tune of ₹ 15,87,571/-. The total administrative expenses claimed by assessee for year under consideration was ₹ 30,87,571/-. The Ld. CIT(A) based on disallowance made for assessment year 2009-10 being the immediately preceding assessment year and considering the fact that assessee executed JDA during the previous year relevant to assessment year under consideration, allowed expenditure of ₹ 15 lakh as sufficient for running the company. 9.2. We note that in all the preceding assessment years a proportionate amount of expenditure was disallowed, which has not been contested by assessee before this Tribunal. Assessee has restrained from filing any appeal before this Tribunal in any of the preceding assessment years. Further assessee has placed in the paper book, the orders passed by 1st appellate for preceding assessment years. There is a categorical observation in all the preceding assessment years by the Ld. CIT(A) therein that, assessee had an increase in work in pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee offered capital gains tax for assessment year 2013-14 taxing the sale consideration of ₹ 19.30 crores. However, the Ld. AO rejected capital gains offered in assessment year 2013-14, by holding that the said income is to be taxed in the year under consideration being assessment year 2010-11. Ld. AO held that capital gains is to be computed by taking ₹ 22.30 crores as sale consideration, being the non-refundable deposit received by assessee from M/s. Plama Developers Ltd., and the cost of construction at ₹ 1,880/-, contemplated to be disclosed by M/s. Plama Developers Ltd., with the area allotted to assessee being 48,503 sq.ft. 11.4. The Ld. CIT(A) upheld the action of the Ld. AO in taxing the capital gain in the year under consideration by observing that capital gain arose on the date of handing over the possession of properties to the developer and assessee has handed over the possession of the land to M/s. Plama Developers Ltd., during financial year 2009-10 and the capital arising from the transfer of the said land is to be taxed in the assessment year 2010-11. 11.5. The Ld. CIT(A) however observed that the consideration received by assessee for trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... developers. The Ld. CIT.DR relied on the decision of Hon'ble Karnataka High Court in case of CIT vs. Dr. T.K. Dayalu, reported in 202 Taxmann 571. He also placed reliance on the decision of Hon'ble Bombay High Court in case of Chaturbhuj Dwarkadas Kapadia vs CIT reported in (2003) 260 ITR 491. 11.10. The 2 issue that arises from these facts are that; 1. The Ld. AO disputes the year in which transfer of the land took place and the year in which the capital gains is to be declared; and 2. The consideration received/receivable by assessee for such transfer. Issue 1: On perusal of the order passed by the Ld. CIT(A), there is categorical observation that, in the first appellate order passed in case of M/s. Plama Developers Ltd., the sale consideration shown was ₹ 22.30 crores. The Ld. CIT(A) observed that M/s. Plama Developers Ltd., during the financial year relevant to assessment year 2010-11, paid sum of ₹ 22.05 crores towards the purchase of land in the following manner: paid to the assessee before us- ₹ 16.30 crores paid to SHPL (on behalf of assessee)-₹ 3 crore paid to SHPL as interest- ₹ 2.75 crores 11.11. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owners agree to transfer 60% of the undivided share to the developer or anyone nominated by the developer in the development with the right to enter into nomination agreement for sale of such undivided share and also the construction agreement for corresponding constructed ATI in the building/S to be constructed on the scheduled property at the developer's own risk and the owner's grant licence and permission to the developer to enter upon and construct the commercial and residential building. The developer shall construct a commercial and residential building, in the scheduled property at his own cost and expenses as per the detailed specifications annexed with to this agreement which shall form part of this agreement; 11.14. Subsequently clause 1.3 also reads as under: 1.2) The owners have licensed the developer to enter upon the schedule property for the purpose of development in terms of this agreement, and the developer shall comply with all its obligations under this agreement; provided however that, nothing herein contained shall be construed as delivery of possession in part performance of any agreement of sale under section 53A of the Transfer of Property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es that the owners being the assessee as along with individual owners had given the control of the land to the developer. By virtue of the terms and conditions mentioned in the agreements referred to herein above, transfer as contemplated under section 2(47)(v) of the Act had taken place during the relevant year under consideration. The land mentioned in the JDA was transferred as was the provisions of the said section and part performance was made by the developer by paying the consideration towards the transfer of the land. 12.2. In our view considering the above facts and carefully examining the various clauses under the JDA as well as supplementary JDA entered into by assessee with the developer on various dates, it is clear that the non-refundable consideration was given a by the developer to the assessee for acquisition of undivided share in the land apart from the superstructure falling into assessee's share to be constructed by the developer free of cost. We also refer to the specific power of attorney entered into by assessee with the developer wherein there is an agreement arrived between the parties that the developer would be the ultimate transferee for the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this Tribunal in case of M/s. Plama Developers Ltd. in ITA No. 1362/Bang/2017 and ITA No. 1363/Bang/2017 for AY 2010-11 and 2011-12 by order dated 28.09.2018. The said order is placed at pg 532 of paper book. There is a categorical observation by the Ld. CIT(A) therein that the money paid by Plama Developers to M/s. T.V. Aleyas is towards sale consideration of the land. In our view the above observations by Hon'ble Supreme Court is an exception to the situation in hand, where assessee's facts are squarely covered. 12.5. We are therefore unable to appreciate the arguments advanced by the Ld. AR under such peculiar facts that emanate from records that assessee had only granted right to enter the land for purposes of developing. 12.6. We therefore respectfully following the observation of Hon'ble Supreme Court in the case of CIT vs. Balbir Singh Maini (supra) and CIT vs. D.K. Dayalu reported in 292 Taxman 531 do not find any infirmity in the view taken by Ld. CIT(A). Accordingly ground 4-5 in assessee's appeal stands dismissed. Assessee has also raised following additional ground: 6A. That the Learned Assessing Officer ( AO ) erred in law and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f land by virtue of JDA, the logical consideration for such land transfer would be the actual consideration received or guidance value as determined by the sub-registrar or stamp duty authorities as on the date of transfer whichever is higher. Any gain on sale of such built up area to be received in future is subjected to tax in the respective years in which said area is transferred by the appellant. In the instant case, the actual sale consideration on the basis of information analyzed has been found to be ₹ 19.30 crore. The said consideration is more than the guidance value of the land transferred by the appellant for Joint Development, which is ₹ 2,97,00,000/-. The sale consideration offered by the appellant is ₹ 1,7817,803/-. Higher of the three needs to be accepted as sale consideration for transfer of rights in the property. Accordingly, the addition made by the AO to the tune of ₹ 19.30 crore is sustained and the appellant gets relief of ₹ 3.00 crore (out of ₹ 22.3 crore taxed by the AO) and ₹ 9,11,85,640/- brought to tax by the AO towards the value of the built up area. The deletion of addition relating to value of built up area is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) on other assets at normal rates. The Ld. CIT.DR submitted that there is a categorical finding by the Ld. CIT(A) regarding no business being carried out by assessee in the AY 2009-10 and 2010-11. He submitted that with such observations assessee was not entitled to claim depreciation at all. It is the contention of revenue that business has to be carried on by assessee during the previous year to be eligible for depreciation. Ld. CIT.DR relied on observation of Ld. AO. On the contrary, the Ld. AR relied on order passed by the Ld. CIT(A). We have perused the submissions advanced by both sides in the light of records placed before us. The Ld. AO in the assessment order denied depreciation as no business activity was carried on by assessee during the relevant previous year. He also denied carry forward of depreciation amounting to ₹ 26,60,158/-. In order that the assessee can be entitled to depreciation, assessee must carry on a business. It is not necessary that the business should in fact yield profits. The carrying on of a business may result in loss; but the particular activity carried on by the assessee must be such as must be calculated to yield profit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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