9911796707
TMI Blog2022 (12) TMI 1305X X X X Extracts X X X X X X X X Extracts X X X X ..... r omit any of the grounds of appeal before or during the hearing of the appeal." 3. The grounds of appeal raised by the Revenue are as under: -- "1. Whether on the facts and circumstance of law, the Ld. CIT(A) has erred in deleting the addition amounting to Rs.98,28,36,362/- and failed to appreciate that the appellant had created and entered into sham transactions with group entity with the sole purpose of diverting revenue accruing to the assessee on account of sales of residential units. 2. Whether on the facts and circumstances in case of law, the Ld. CIT(A) has erred in restricting the disallowance u/s 14A of the I. T. Act to the extent of exempt income received by the assessee during the year under consideration without appreciating the Circular No.5 of 2014 dated 11.02.2014 of CBDT." 4. Ground No. 1 of both the appeals of the assessee and the Revenue are inter-connected and is therefore being taken up together. Briefly stated, the facts of the case are that, the assessee is a private limited company engaged in the business of real estate development, constructing residential & commercial buildings and trading in shares. Further, the assessee has earned income by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cost 4,91,86,09,609 Total (B) 23,45,73,43,151 Cost Per Sqft (G) 37,127 ACTUAL Land Cost 2,87,35,80,265 Construction Cost 8,15,84,99,634 Borrowing Cost 3,15,02,43,446 Total Project Cost (C) 14,18,23,23,345 ACTUAL Carpet Area (Sqft) (D) 1,58,126 Sales value (E) 6,60,63,70,000 Parameters as per revised Guidance Note 23 % of Completion of Work (C/B) (F) 60.46% % of area Sold For determining Revenue Recognition (D/A) 25.03% Sale Amount on Revenue Recognition (E x F) 3,99,42,15,153 Cost on Revenue Recognition (G x D x F) 3,54,94,77,576 Gross Profit 44,47,37,577 Less: ICDS Impact (7,17,56,213) Profit Offered in COI of the year 37,29,81,364 5. When enquired by the AO as to why the initial working submitted on 30.01.2018 (before the Investigation Authorities) should not be considered, the assessee explained that it was an estimated working prepared prior to close of the year and therefore it should be ignored. Appreciating the said submission, the AO did not take cognizance of the initial estimated working furnished on 30.01.2018. 6. The AO thereafter noted that the assessee had entered into option agreement for sale of twenty (20) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... q.ft) 1,58,126 Sales Value 8,35,01,89,684 Percentage of completion of Work % of completion of work 60.46% % of Area sold for determining Revenue Recgn. 25.03% Sale Amount on Revenue Recognition 5,04,85,29,551 Cost on Revenue Recognition 3,54,94,77,576 Gross Profit 1,49,90,51,975 Less: Offered in COI 44,47,37,577 Balance 1,05,43,14,398 Less: ICD Impact (7,17,56,213) Balance to be offered to tax 98,25,58,185 7. In view of the above calculation, the AO accordingly added further sum of Rs.98,25,58,185/- to the total income of the assessee. Aggrieved by the aforesaid action of the AO, the assessee preferred an appeal before the Ld. CIT(A). On appeal, the Ld. CIT(A) after examining the facts of the case, held that the option agreements entered into by the assessee with HRPL was acceptable and not sham. The relevant findings of Ld. CIT(A) are as under: "5.11 The assertion made by the appellant that option agreements are acceptable mechanism to introduce funds into a real estate project from desirous investors is found to be acceptable. Block investment in realty projects are acceptable financing model. For the investor, the flat provides necessary security ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already been held earlier that transactions of such option assignment arrangement are a market reality and are undertaken to meet fund requirements as well as transfer risks. Hence, to this extent, the AO's action has not been held as correct. But, the claim of the assessee that the AO could not examine the transaction value in light of either commercial expediency or independent legal/corporate structure is not found tenable and is rejected. The AO was fully competent to examine whether the flats had been transferred to the other party a prevailing rates or not. ...... 5.18 The assessee further claims that it had entered into an option agreement with Hypercity which allowed Hypercity either to exercise its right to purchase the flat at the pre-determined rate or to assign its right to a third party. Once Hypercity had transferred its right to a third party for a consideration, the income arising out of such consideration could not be taxed in the hands of the assessee. What can be taxed in the hands of the assessee is real income and not notional income. The claim made by the assessee is found tenable to the extent as the structure entered into by the assessee with Hypercity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... project as iconic, designed by international designers and one of the finest lifestyle projects undertaken by the appellant. The prices of these flats in subsequent years clearly indicate that the prices of these flats are much higher than the ready reckoner prices. During the course of hearing, the appellant was asked to explain whether its own prices were linked to ready reckoner prices. No such evidence has been produced before me to demonstrate such relationship. The sale prices of the assessee's flats are significantly higher than the ready reckoner prices as the assessee deals in high end flats which command high premium and which carry significantly higher costs. There being no relationship between the market price of the assessee's flats and the ready reckoner values, the claim made by the assessee that the option agreement values are justified because they are higher than the reckoner values is not found acceptable. 5.27 However, it is also noted that Hypercity has indeed contributed over Rs.104 crore to the appellant as option deposit. By doing so and by entering into an agreement with the assessee, it has indeed assumed a part of the risk related to sale of flats. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee for AY 2018-19. The relevant working is found at Para 5.33 of the appellate order, which for the sake of convenience, is reproduced below: "5.33 Based on the above computation, the income of the assessee for the AY 2018-19 is computed as below: Particulars Amount as on 31.03.2018 Total Carpet Area Sq. ft (A) 6,31,810 BUDGETED Land Cost 2,87,35,80,265 Construction Cost 15,66,51,53,277 Borrowing Cost 4,91,86,09,609 Total (B) 23,45,73,43,151 COST PER Sq. ft (G) 37,127 ACTUAL Land Cost 2,87,35,80,265 Construction Cost 8,15,84,99,634 Borrowing Cost 3,15,02,43,446 Total Project Cost (C) Refer (Annexure III) 14,18,23,23,345 ACTUAL Carpet Area (Sq ft) (D) 1,58,126 Sales Value (E) 6,90,15,76,891 Parameters as per Revised Guidance note 23 % of Completion of Work (C/B) (F) 60.46% % of Area Sold for determining Revenue Recognition (D/A) 25.03% Sales Amount on Revenue Recognition (E x F) 4,17,26,97,412 Cost on Revenue Recognition (G x D x F) 3,54,94,77,576 Gross Profit 62,32,19,836 Less: ICDS Impact (7,17,56,213) Net Profit 55,14,63,623 Less: Offered in COI 44,47,37,577 Balance 10,67,26,046 12. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d facts and circumstances leading to such agreement. We find that, the assessee company, in the instant case, had launched a residential project - 'Artesia' in Worli, Mumbai, whose title certificate was issued on 06.05.2009. The proposed development was subject to approvals and clearances from the Municipal Corporation of Brihanmumbai. In the meantime, the assessee had begun marketing the said residential project and in FY 2010-11, the assessee was only able to obtain bookings for two (2) flats in the proposed development. In the same year, the assessee entered into an agreement with its associate entity, HRPL in terms of which the latter was given a pure irrevocable option to purchase twenty (20) flats in this project. Copy of a sample option agreement along with supplementary agreement is found placed at Pages 32 to 70 of the paper book. On conjoint reading of these agreements, it is noted that Clause (3) of the Original Agreement sets out the details of the proposed flat which would be constructed at the proposed project along with the Option Price viz., the price at which the option holder i.e. HRPL could purchase the said flat. Once HRPL would exercise this option, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etter (read with the said MoU) has fixed the Revised Fixed Price for the proposed Apartment, as on the date of the said Letter. The Option Holder has deposited Rs.99,00,000/- till date as part of the Option Deposit under the said MOU read with the said Letter. As also paid Rs.7,49,068/- as Service Tax thereon. Clause 29 of the said MOU entitles the Option Holder to a one time right to assign and transfer the option rights under the said MOU to a third party, after expiry of 12 months from the date of the MOU." 16. It is noted from Clause (8) of the original Agreement that, the option holder was required to a place deposit with the assessee, to retain the right to exercise the option to purchase the flat and enable the Developer to reserve the said flat. The schedule and conditions for payment of option deposit as agreed between the assessee and HRPL are as follows: "Deposits 8. The Option Holder shall deposit the following amounts (subject to proportionate variation commensurate with variation in carpet area, if any) with the Developer as refundable deposits (free of interest), to retain the right to exercise the option to purchase the Flat, and to enable the Developer to rese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posit is/shall be paid in installments as follows:- (i) Rs.1,06,49,068/- received by the Developer from the Option Holder prior to execution hereof as follows:- Rs.25,00,000/- received on 25.03.2010 Rs.27,50,000/- received on 02.05.2011 Rs.27,50,000/- received on 06.05.2013 Rs.1,55,788/- received on 20.08.2013 Rs.24,74,280/- received on 20.12.2013 Rs.19,000/- received on 06.01.2014 The aforesaid amounts have been received with applicable service tax, which has been paid by the Developer to the Authorities. (ii) Rs.1,41,00,000/- was due and payable prior to execution hereof (iii) Rs.1,25,05,000/- to be paid on or before 20.07.2014 (iv) Rs.52,15,000/- to be paid on or before 20.09.2014 (v) Rs.52,15,000/- to be paid on or before 20.11.2014 (vi) Rs.52,15,000/- to be paid on or before 20.01.2015 (vii) Rs.52,15,000/- to be paid on or before 20.04.2015 (viii) Rs.52,15,000/- to be paid on or before 20.07.2015 (ix) Rs.52,15,000/- to be paid on or before 20.10.2015 (x) Rs.52,15,000/- to be paid on or before 20.01.2016 (xi) Rs 52,15,000/- to be paid on or before 20.04.2016 (xii) Rs.52,15,000/- to be paid on or before 20.07.2016 (xiii) Rs 52,15,000/- to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Housing Development Finance Corporation Ltd. in respect of the said plot of land; (2) Rents, premium, transfer charges, renewal, redevelopment, change of user and other terms conditions and policies of MMC (Estates) and relating to the municipal lease of the said plot; (3) Mutation of records in favour of Developer by MMC (Estates); (4) Parking lot, amenity space and road setback areas to be handed over to MMC (in keeping with the policy, rules and regulations as may be inforce from time to time); (5) Approvals, renewals & sanctions from various statutory authorities yet to be obtained; including from MMC (Estates), MMC (Building Proposals), MOEF etc. The Developer is and shall be entitled to create charge on the said plot of land and/ or the building (including the said Flat and the parking space) to which the Option Holder does not and shall not object provided that, In the event the option to purchase the said Flat is exercised and the Agreement for Sale is executed then the Developer undertakes to vacate the charge, then existing if any, on the said Flat and the parking space prior to handling over its possession to the Purchaser." 19. The above clause was not ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to obtain requisite approval was omitted, as the certificate of commencement (dated 27.05.2013) had since been obtained. The amended Termination Clause read as follows: "17. This Option MOU shall stand terminated and the right to exercise the option shall come to an end and stand relinquished in the earliest of the following events:- (a) By Option Holder's failure to pay any part of the Option deposit within the time provided in this Option MOU, on expiry of 15 days' notice of demand from the Developer; (b) Upon expiry of 30 days from Option Holder's exit notice in writing to the Developer (without any clause); (c) Upon expiry of 30 days' notice in writing from the Option Holder to the Developer, if the said Documents are not provided by the Developer to the Option Holder on or before 30th December, 2014; (d) If the option to acquire is not exercised by the Option Holder within the said Period of 30 days (from and after Developer has provided the said documents to the Option Holder);" 22. Clause (30) of the Original Agreement stated that, in the event, HRPL did not exercise the option and sought to surrender it and obtain refund of the deposits placed with the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein, it is thus noted that in the year 2010, HRPL had acquired an option to buy flats in the proposed development, which would be constructed by the assessee, in lieu of which it had placed adjustable interest-free security deposit. It is noted that, at the material time, when this agreement was entered into, even approval/clearance from the local authority for commencement of construction was pending. Further, this option deposit was neither secured nor did it give HRPL any right to specific performance. It was only an irrevocable option and not an Agreement for Sale. It is only when the option is exercised that an Agreement for Sale would be executed. If the option was not exercised or surrendered at the instance of the option holder, i.e. HRPL, the assessee was required to only refund the principal security deposit, without any interest, damages or additional claim thereon. It was only if the assessee failed to provide the documents, as agreed upon, to HRPL, which would result in termination of the agreement, that compensation would become payable by the assessee to HRPL, over and above the security deposit. However, it is noted that there was no definitive manner provided fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the price of such constructed spaces. However, if the project gets stalled or delayed or is unsuccessful, then these investors can only seek refund of their capital/deposit invested, which is either refunded with or without interest, depending upon the terms agreed upon. In such a transaction, the financial investor is also faced with a risk of loss of capital/deposit, as the same is generally unsecured. As noted at Para 7 above, such an arrangement, was noted by the Ld. CIT(A) to be an acceptable financial model in the real estate industry. 26. The Ld. DR for the Revenue in her written submissions noted that such agreements were indeed in vogue, but according to her, just because such arrangements are common, it would not validate the transaction between the assessee and HRPL. According to the Ld. DR, the assessee did not demonstrate its urgent need for low-cost capital in as much as according to her, the assessee had sufficient own funds and therefore there was no useful purpose served by entering into such option agreements with HRPL and thereby forfeiting expected future profits. The Ld. DR also highlighted the fact that the assessee had advanced significant loans to related ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erogative of the businessman and that the Revenue cannot place itself in the shoes of the businessman and dictate as to how the businessman ought to run its operations or raise funds. Inviting our attention to the Balance Sheet for the FY 2009-10 [Page 1 of the paper book], the Ld. AR pointed out that, the assessee had substantial borrowings as against its own capital and reserves and therefore the assessee was already saddled with substantial borrowing costs. Hence, according to him, the financial model adopted by the assessee for raising funds by way of interest-free deposits from HRPL by entering into option agreements was a commercially expedient transaction as not only was (a) the company able to raise substantial funds without any cost or interest, but at the same time, (b) the company also ensured commitment for sale of twenty (20) flats upfront in their proposed development, construction of which was yet to begin at that material time. As far as the loans advanced by the assessee was concerned, he pointed out that these loans were given to sister concerns in the course of real estate business which carried commercial rate of interest and therefore the advancement of such lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to the tune of Rs.11 crores and that the option deposits aggregating to Rs.104 crores only accumulated with the assessee in the later years, when the sales had picked up, which further raised serious doubt on the genuineness of option agreement. In the rebuttal, the Ld. AR pointed out that the option deposits were received in the manner and schedule as agreed in the agreement and therefore the suspicion of the Ld. DR was factually unfounded. 30. We note that, it is not in dispute that, although the option agreements were entered into in 2010, the necessary approval/clearance to commence construction was received only in FY 2013-14. The terms of the option agreement manifestly lays down the installment schedule for payment of option deposits. We note that it is not the case of the Revenue that the option deposits were not paid to the assessee within the time lines as agreed upon. Understandably, until the construction work began, there was little need of funds by the assessee. It was only when the certificate for commencement of construction was received on 27.05.2013, that the actual requirement for working capital arose, and until then the assessee had admittedly been able to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the armchair of a businessman or in the position of the board of directors and assume the said role to decide how much is a reasonable expenditure having regard to the circumstances of the case. We need not go into any hypothetical issue in this case in view of the accepted position that the factum of services rendered by CDL has not been refuted by the revenue. It needs no reiteration that the settled position in law is that no businessman can be compelled to maximise his profits. The obvious answer to the first question is in the affirmative, in favour of the assessee and against the revenue." 33. The Hon'ble Supreme Court in the case of S.A. Builders Ltd. Vs CIT(A) (288 ITR 1) at para 34 of the order has observed as under:- "34. We agree with the view taken by the Delhi High Court in CIT v. Dalmia Cement (Bharat) Ltd. [2002] 254 ITR 377 that once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration by the larger Bench can very well be answered by opining that the Assessing Officer or the appellate authorities and even the courts can determine the true legal relation resulting from a transaction. If some device has been used by the assessee to conceal true nature of the transaction, it is the duty of the taxing authority to unravel the device and determine its true character. However, the legal effect of the transaction cannot be displaced by probing into the "substance of the transaction". The taxing authority must not look at the matter from their own viewpoint but that of a prudent businessman. Each case will depend on its own facts. The exercise of jurisdiction cannot be stretched to hold a roving enquiry or deep probe.' 36. In all the above judgments, we note that the Courts have time and again observed that, whether the transaction is expedient for the purpose of business has to be looked at by the Income-tax Authorities from the view-point of the assessee as a prudent businessman and not from the armchair of the AO. The Courts have observed that it is the assessee who knows its business. It is its success or failure in the business, which is material to it. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction is with it associate concern, it perforce mandates that the transaction be examined with reference to whether the transaction is as per open market terms or not. The rates at which final transactions have been made allowing returns at the rate in excess of 200-300% of its deposits glaringly indicate that it was not so. The normal practice is to sell on built up area basis. By assigning the flats on carpet area basis, the rate has been further suppressed drastically as regards the option agreements is concerned. It is further seen that the rate also subsumes the two parking lots that as per normal business practice, are sold separately or commensurate amounts loaded into per square feet rate. 4.1 The decision of the CIT(A) to compare per square feet rate to arrive at the market rate wide para 5.29 of his order misses the critical factors identified by the CIT(A) himself vide para 5.27 wherein he himself ruled that reward to HRIPL should be in proportion to the capital contributed and risk assumed. But in the final decision to consider the rate compared on the basis of the flat 1401 ignores both these elements. 4.2 As stated earlier the initial amount received was only five ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the supplemental agreement, the total payment received till the date of signing of the supplementary agreement is a mere 99 lakhs. Refer Pt. D of the supplemental option as per page 52 of the PB]. The timelines of these payment are also not clear, whether they are as per the terms or at the fag end/just before executing the supplementary agreement. From the summary of submission of the assessee in CIT(A) order in pt.4 [page 8/64 of the CIT(A) order] it is seen that this has been sold within an year of the supplementary agreement (at option price of 10.43 crs) has been sold to another party (Archstone) @ 24.52 crores. Thus for a mere 99 lacs, HRIPL has been gifted with the profit of 17.326 crs as per original option agreement and 14 crore vis a vis the supplemental option, out of the total sale transaction. A return of 17 times on a mere 99 lakhs investment (as per original investment)]. This agreement defies any prudent / commercial logic seen in case of transactions between independent parties in the open market. 5 The option agreement entered by assessee with its associate concern by virtue of absence of any basis or uniformity with regards to financial terms of option agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was a significant loss of faith amongst customers in the real-estate developers and even the market was highly sluggish. Even the Banks/FIs were highly cautious in funding new projects. There was little to no demand for real estate amongst end-customers and even then, such customers wanted to invest only in completed projects and not in to-be constructed or under construction projects. The Ld. AR submitted that, in FY 2009-10, when HRPL entered into the option agreement with the assessee for acquiring twenty (20) flats in the proposed development - 'Artesia', HRPL had assumed significant risks back then. He pointed out that, not only were the option deposits placed by HRPL interest-free, but were unsecured as well. He submitted that in 2010, neither HRPL nor the assessee could have said with conviction that the proposed development would be completed within time, and that it would also be successful and that the constructed spaces would derive the prices/value, which it ultimately did in later years. The Ld. AR thus submitted that at that material time in 2010, had it been any other unrelated party, similar option agreement would have been negotiated with reference to the prevail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 31.03.2010. The assessee has enclosed balance sheets at the relevant dates in the PB and the relevant pages for reference are Pg No. 10 & 22. 8. The option agreements for 20 flats with Hypercity have been entered for flats at 14th floor to the 21st Floor in the range of Rs 24,500 to Rs 28,155 per sq ft. Attention is drawn to Pg No.74 of the PB. As mentioned in the above paragraphs, these transactions were entered on 25.03.2010. Just before the option agreements were entered with Hypercity, the assessee entered into option agreement for 2 flats on the 27th Floor, one with Universal Polymers and the other with Mukul Deora at the comparable rate at which the transaction was done with Hypercity. The transaction with these two third parties was done at the rate of Rs. 34,000 per sqft since the flats were on the 27th Floor whereas the flats of Hypercity were on the 14" to 21% Floor. Thus, the difference of rate is partly attributable towards floor rise. The difference in the rate is in the range of Rs. 6,000 to Rs. 10,000 per sqft and at the same time the difference in the floors is 6 to 13 floors. One more crucial reason of the rate difference is that Hypercity had booked 20 flats a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs are available on page no. 73. None of the authorities below have alleged that the agreements are not uniform. The allegations made are without any supporting. 6. Paragraph no. 6 The amount of actual consideration received with regard to each flat is available on pg. no. 73 and pg. no. 75 of the paper book." 39. Having examined the submissions of both the parties, we first find it necessary to recapitulate the facts of the case. The admitted facts are that, the option agreement with HRPL was entered into in 2010 when the project-'Artesia' had not even taken off. In fact, the construction only commenced after expiry of more than three years viz., in FY 2013-14. Hence, we agree with the Ld. AR that, the ultimate fate of the project, whether it would be well received by the end-customers, or whether expected revenues would be achieved was completely unknown at the material time, when the option agreement was entered into. It is also a known fact that the year 2010 fell within the global recession period and therefore the prevailing market conditions in that year could not be compared with later years. We thus note that, in the year 2010, when the funds were contributed by HRP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on but evaluation i.e. moving the post of result determined out of projections. The revenue is doubting the valuation because the actual revenues were favourable. In rational decision making, the actual results are irrelevant." 40. Although the said decision was rendered in the context of valuation of IPRs, but the ratio laid down therein is held to be applicable in the facts of the instant case. 41. Although we do not subscribe to the basis of benchmarking of the Ld. CIT(A) and Ld. DR, but we agree with the Ld. CIT(A) to the extent that, it was necessary for the assessee to demonstrate that the option price agreed upon with HRPL was reasonable, having regard to the prevailing market conditions that existed then. It is noted that, the Ld. CIT(A) in his appellate order, had pegged the arm's length price of all the twenty (20) option agreement with reference to the rate at which HRPL had sold/assigned one of the Flat No. 1401 to an unrelated party in the next financial year succeeding the year of option agreement. The Ld. DR, on the other hand has claimed that the prices at which HRPL assigned/sold its respective options to third parties in later years should be taken as the arm's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed sale consideration is equal to or higher than the prevailing market value for stamp duty purposes, at the time of agreement. Hence, if the prevailing stamp duty value is not higher than the agreed sale price (Rs.58,323/sq. ft.), then the actual sale consideration has to be accepted and it cannot be substituted with any other deemed value (Rs.72,900/sq. ft.). Having regard to the aforesaid facts and position of law, in our considered view therefore, neither the AO nor the Ld. CIT(A) could not have substituted the option price agreed between the assessee and HRPL with any other value, save for the ready reckoner rate, which, as already noted, was commensurate with the option price. 42. Even otherwise, for the sake of completeness, we deem it fit to examine the benchmarking analysis undertaken by the Ld. CIT(A) as well as the Ld. DR. It is noted that, the Ld. CIT(A) had cited the instance of Flat No. 1401 assigned/sold by HRPL to an unrelated party to benchmark the option price of all twenty (20) flats. According to the Ld. CIT(A), HRPL had acquired the option for Flat No. 1401 for a price of Rs.27,429/sq. ft. which was sold to a third party for Rs.30,522/-/sq. ft. in FY 2011-12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reover, as noted in the preceding paragraph, the increase in price of the flats over the years was substantial (as high as 72% between 2013 and 2015) and therefore this gain of 11% derived by HRPL in a span of one year cannot be viewed with suspicion. 44. It is further observed by us, that the majority of the profit of Rs.175.15 crores made by HRPL from the other nineteen (19) flats was over a span of 50 to 92 months and therefore the action of the Revenue in picking and choosing one single instance of Flat No. 1401 to allege that, HRPL made substantial profits in a short span of time, cannot be countenanced. It is further noted that, similar option agreements had also been entered into by the assessee with several other third parties, who also had paid option deposits, in similar manner, as that of HRPL, the details of which are noted to be placed at Page 73 of the paper book. We note that, the Revenue has neither disputed nor questioned these option agreements entered into by the assessee with other third parties, whose terms and conditions are noted to be similar to that of the option agreement between the assessee and HRPL. From the details placed before us, it is noted that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cannot reach to a serious conclusion that the entire transaction was collusive and colourable only to book losses. 7. In view of the above we answer the above question raised in the appeal against the revenue and in favour of the assessee. The appeal stands dismissed with no order as to costs." 45. We also find merit in the submissions of the Ld. AR that differences in option prices and the prices at which sales were made by HRPL to ultimate buyers in later years was attributable to several factors viz., timing differences, different market conditions, difference in floor etc. As noted earlier, the year 2010 was a period of recession and therefore the prevalent market conditions significantly varied in comparison to 2013 and onwards, when the recession had subsided and the markets were gaining momentum. It is also noted that, HRPL had bulk-booked twenty (20) flats, that too at a point of time when even the requisite clearance/approval from local authority was pending. Hence, the price negotiated by HRPL for twenty (20) flats could not be compared with a single flat sold to an unrelated party. It was also demonstrated by the assessee that the prices varied depending upon the fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years, and hence it did not result in creation of any tax liability upon the assessee. Although, we agree with the Ld. CIT(A) that, this fact alone cannot be a decisive factor to decide the acceptability of the option agreement, but having regard to the overall facts and circumstances of the case as already discussed in the foregoing, this fact pointed out by the Ld. AR does have persuasive value. 48. For the reasons set out above, therefore, the addition of Rs.98,25,58,185/- made by the AO is held to be unjustified both on facts and in law. Accordingly, the Ground No. 1 of the appeal of the assessee is allowed and the Ground No. 1 of the appeal of Revenue is dismissed. 49. Ground No. 2 of the appeal of the Revenue is against the deletion of further disallowance of Rs.1,78,177/- made by the AO u/s 14A of the Act. Facts in brief are that the assessee has earned dividend income of Rs. 4,10,266/- and the assessee had made suo-moto disallowance of Rs. 4,10,266/-. The AO, by invoking provisions of Rule 8D(2)(iii) computed disallowance of Rs.5,88,383/-. After allowing the credit of suo-moto disallowance, the net disallowance of Rs.1,78,177/- was made by the AO. The Ld. CIT(A) allowed t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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