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TMI Blog2021 (12) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 forgoing grounds. IV. For t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 in the activity of running club with swimming pool, billiards etc and real estate busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner after that date without reference to the developer. d) Rs. 1 crore - at the time of me Pooja which have not been later than 30 days from the date of plan sanctioned. e) Rs. 10.5 crores, (in monthly installments of rupees one crore each and last being Rs. 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 search under section 132 of the Act, was conducted at the premises of M/s. Plama Developers Ltd., on 09/01/2013. Certain documents/agreements were found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P & L Account, the administrative expenses claimed are Rs. 30,87,571/-, which has increased from Rs. 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 Rs. 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 Rs. 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 Rs. 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 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 recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 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 Rs. 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 progress. 9.3. 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 justifiabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration, being the non-refundable deposit received by assessee from M/s. Plama Developers Ltd., and the cost of construction at Rs. 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 transfer of the land was Rs. 19.30 crore as against Rs. 22.30 crores considered by the Ld. AO. 11.6. Before us, the Ld. AR argued that provisions of section 2(47)(v) of the Act is not applicable as assessee has only given license to the developer to enter into the land to start construction. There was no transfer or legal ownership of the property to the developer. 11.7. The Ld. AR vehemently submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 Rs. 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 Rs. 22.05 crores towards the purchase of land in the following manner: paid to the assessee before us- Rs. 16.30 crores paid to SHPL (on behalf of assessee)-Rs. 3 crore paid to SHPL as interest- Rs. 2.75 crores 11.11. It was on the above factual findings in case of M/s. Plama Developers Ltd. that Ld. CIT(A) determined the consideration for transfer of land by assessee to be at Rs. 19.30 crores (16.30+3), during the assessment year 2010-11. Admittedly assessee has received Rs. 19.30 crores during the relevant year under consideration. There is nothing on record to establish that assessee received anything over and above Rs. 19.30 crores. We therefore do not find any inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 Act, 1886 or section 2(47)(v) of the Income tax Act, 1961; 11.15. We note that assessee, subsequently entered into power of attorney dated 10/07/2008 for the developer to carry out the construction in the scheduled property. A specific power of attorney is also executed on 10/07/2008 granting power to the developer to transfer and convey by way of sale, gift, lease, mortgage, etc., the 60% of undivided share title right and interest and ownership in the scheduled property and to receive the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sale of structures constructed and falling into the developer's share without any notice to the assessee. The specific power of attorney categorically mentions that the developer need not inform or put assessee to notice for sale of the undivided area falling into the developers share. 12.3. The Hon'ble Supreme Court in case of CIT vs. Balbir Singh Maini reported in (2017) 398 ITR 531. In case of CIT Vs. Balbir Singh Maini (Supra), Hon'ble Supreme Court also observed as under:- "22.1 "The object of sec. 2(47)(vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 facts in passing the assessment order under section 153C read with section 143(3) as the conditions provided in section 153C regarding seized documents belonging to the appellant was not satisfied in the present case." On perusal of the CIT(A) order, we note that assessee has not pressed to adjudicate this ground with all its sub-ground. The Ld. CIT(A) had dismissed the legal issues raised by assessee in respect of jurisdiction to make assessment u/s. 153C. We note that ground no. 2.1 raised by assessee before Ld. CIT(A) is same as additional g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance value of the land transferred by the appellant for Joint Development, which is Rs. 2,97,00,000/-. The sale consideration offered by the appellant is Rs. 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 Rs. 19.30 crore is sustained and the appellant gets relief of Rs. 3.00 crore (out of Rs. 22.3 crore taxed by the AO) and Rs. 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 supported by the decisions of Hon'ble ITAT referred to by the AR of the appellant which are reproduced below: ACIT Vs. Smt. Sarojini M. Kushre, Mangalore (ITA No. 98919/Bang/2014), dated 27.4.2016. b) ACIT Vs. M/s. ShankerVittal Motor Company Ltd. (ITA No. 35/Bang/2015), dated 18.3.2016. 6.14. Thus, the sale consideration received by the appellant for transfer of rights in the land by means of JDA is held to be Rs. 19,30,00,000/-. Accordingly, ground no. 5 is partly allowed and Ground No. 6 is allowed." 13.2. The reasoning given by the Ld. CIT(A) cannot be found fault with, as in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds 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 Rs. 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 profits. The test is not the actual making of the profits; the test is whether the nature of the activity is such as possibly to yield profits to the assessee. Where no business has been carried on by the assessee during the previous year, the assessee cannot claim depreciation. Admittedly, assessee did not carry on any business during the relevant financial year as observed by Ld. CIT(A) himself in para 6 of the impugned order. We therefore hold that the Ld. CIT(A) was wrong in granting depreciation in part to assessee. Accordingly, this ground raised by revenue stands allowed. In the result, the appeal filed by assessee and revenue stan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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