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TMI Blog2023 (2) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable in regard to 40 grounds and 1,896 sq.ft., out of 79 grounds and 2,222 sq.ft., of land owned by assessee under the name 'Firhaven' in MRC Nagar, Chennai and balance 39 grounds 326 sq.ft., is not transferred in view of the terms of arbitral award. For confirmation of addition of long term capital gains partly, assessee in its appeal has raised following Ground Nos.2 & 3:- "2. For that the Learned Commissioner of Income Tax (Appeals) erred in directing the Learned Assessing Officer to re-compute the Capital Gains for the property 'Firhaven' ad-measuring 40 grounds and 1896 sq.ft. held as Stock-in-trade by adopting the Arbitral Award dated 19.03.2018 of Rs.170 crores. 3. For that the Learned Commissioner of Income Tax (Appeals) erred in upholding the Order of Assessing Officer that the provisions of section 2(47)(v) of the Act are applicable to property / land held as Stock-in-Trade. 2.1 The Revenue has raised the following Ground Nos.21. to 2.5 in regards to the order of CIT(A) deleting the addition of long term capital gains partly:- 2.1 The learned CIT(A) has erred in directing the Assessing officer to recomputed the capital gains by taking into sale consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.2019 but no return of income in response to this notice was filed despite service of notice. Further, notice u/s.142(1) of the Act was issued dated 06.12.2019 but no compliance was made. 3.1 The AO on perusal of this agreement for sale noted that there are two General Power of Attorney (GPA) documents executed by assessee, CPIL on 01.04.2015 and 06.04.2015 in favour of Shri Sunil Khetpalia and Shri Manish Parmar, which was also found and seized by the Income Tax Department. As per the above two GPAs, assessee gave power to AEPL in regard to all the rights for getting necessary approvals, development of land, transfer, convey or sell the undivided share of land or superstructure, receive the sale consideration, etc. In pursuance to the above sale agreement and the two GPAs, the AO observed in his assessment order that AEPL has transferred a sum of Rs.282.5 crores to CPIL, the assessee in financial year 2015-16 relevant to this assessment year 2016-17. The AO also noted that this amount was duly accounted for in the books of accounts of the assessee, the CPIL. He also noted that in view of enquiries conducted during the course of search revealed that the possession was handed ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e award. More importantly the above award has been accepted by both the parties. In page 2, clause 03 of the compromise memo it is clearly mentioned that (i) possession of the property was handed over by CPIL to AEPL consequent to the GPAs executed by CPIL dated 01.04.2015 and 06.04.2015, and (ii) AEPL after taking possession of the said property demolished the existing buildings in the property after obtaining necessary permission from the corporation of Chennai vide letter dated 10.07.2015. The relevant page of the compromise memo is scanned and given below for ready reference. ............... ............... From the above fact, it is conclusively proved that the possession of the said land has been given by CPIL to AEPL before 10.07.2015. 3.2 The AO reproduced the statement of Shri Shankar Varadharajan, COO of Shiva Group of Companies on 12.11.2017 and Shri Vallal RCK, Shareholder of the assessee company, the CPIL dated 19.01.2018 and also Shri Maneesh Parmar, Director of AEPL recorded on 31.12.2019 and concluded that the above transaction squarely falls within the meaning of transfer as defined u/s.2(47)(v) of the Act. Accordingly, the AO computed Long Term Capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er material placed before him, noted that AEPL has performed its part of the contract majorly in paying the sale consideration of Rs.15 crores in financial year 2014-15 and Rs.282.5 crore in financial year 2015-16 and accordingly all the conditions as mentioned in section 2(47)(v) r.w.s. 53 of the Act of the transfer of part property are fulfilled to record it as a transfer. According to him, the condition of possession was fulfilled in financial year 2015- 16 only and hence, the capital gain is chargeable/assessable in assessment year 2016-17. 4.1 But while quantifying the quantum of land transferred and sale consideration towards it, he considered the clauses agreed between the parties of the arbitral award and was of the view that the transfer effected by assessee to AEPL is to the extent of 40 grounds and 1,896 sq.ft., and therefore, the sale consideration for the same will remain at Rs.170 crores. For this, he observed in para 6 as under:- 6. The remaining grounds relate to the quantum of land transferred and the sale consideration towards it. The AO though has relied on the Arbitral award for possession part, he has not considered the other clauses agreed between the parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .04.2015. These powers of attorney were also found and seized by Income-Tax Department during search. The AO during the course of assessment proceedings noticed that in addition to the advance of Rs.15 crores paid by AEPL at the time of entering into agreement on 18.03.2015, the assessee has further received an amount of Rs.282.5 crores from AEPL in the financial year 2015-16. Thus the total payment received was at Rs.297.5 crores as against the total sale consideration fixed as per sale agreement at Rs.380 crores. The AO and the CIT(A) considered the arbitral award dated 19.03.2018 and memorandum of compromise entered into by these two parties on 10.03.2018 and also the seized material including the registered sale agreement, power of attorneys and other details of payments. The AO assessed the entire sale consideration of Rs.380 crores as sale consideration on account of transfer of property referred as Firhaven admeasuring 79 grounds and 2222 sq.ft. as capital gains. The CIT(A) considered the arbitral award and noted that the assessee had to sell only 40 grounds and 1896 sq.ft. for a consideration of Rs.170 crores and not the entire land for the consideration stated in the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filment of Conditions to the sale by the Purchaser, the sale has not been fructified. Considering the situation, the Company converted the said Asset into Stock in trade for the purpose of developing the property on its own. 2.23 In the opinion of the Board and to the best of its knowledge and belief, the value of realization of current assets, loans and advances will, in the ordinary course of business, not be less than the amounts at which they are stated in the Balance Sheet." We have also gone through the arbitral award passed by Hon'ble Justice S. Jagadeesan, Sole Arbitrator dated 19.03.2018 whereby it is clarified that they have to carry out certain conditions for execution of sale deed and the relevant is referred in clause 'f' of the arbitral award and the same reads as under:- (f) The Parties herein agree and confirm that out of the total sale advance of Rs.254.83 Crores (Rupees Two Hundred Fifty Four Crores and Eighty Three Lacs only) paid by the Second Party to the First Party, the First Party shall treat and retain Rs.170 Crores (Rupees One Hundred and Seventy Crores only) as sale consideration paid by the Second Party for the total extent of 40Grounds and 1896 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is undisturbed, the same has to be assessed under the head 'business income'. This position has been clarified by the Hon'ble Supreme Court in the case of PCIT vs. Chuni Lal Bhagat, [2019] 103 taxmann.com 379, wherein even the issue of invoking of section 53A of the Transfer of Property Act was held to be not applicable in the absence of registration of JDA. The Hon'ble Supreme Court in the case of Chuni Lal Bhagat, supra, has adjudicated this issue as under:- After considering the relevant statutory provisions and the case law, the following conclusions were drawn: "(1) Perusal of the JDA dated 25.02.2007 read with sale deeds dated 2.03.2007 and 25.04.2007 in respect of 3.08 acres and 4.62 acres respectively would reveal that the parties had agreed for pro-rata transfer of land. (2) No possession had been given by the transferor to the transferee of the entire land in part performance of JDA dated 25.02.2007 so as to fall within the domain of Section 53A of 1882 Act. (3) The possession delivered, if at all, was as a licencee for the development of the property and not in the capacity of a transferee. (4) Further Section 53A of 1882 Act, by incorporation, stood ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession under section 53A of TP Act. If they are entered before this day, they may be relied upon to apply for regularization of allotments/leases by Development Authorities. We make it clear that if the documents relating to 'SA/GPA/WILL transactions' has been accepted acted upon by DDA or other developmental authorities or by the Municipal or revenue authorities to effect mutation, they need not be disturbed, merely on account of this decision. 19. We make it clear that our observations are not intended to in any way affect the validity of sale agreements and powers of attorney executed in genuine transactions. For example, a person may give a power of attorney to his spouse, son, daughter, brother, sister or a relative to manage his affairs or to execute a deed of conveyance. A person may enter into a development agreement with a land developer or builder for developing the land either by forming plots or by constructing apartment buildings and in 18 I.T.A. Nos.222 & 310/Chny/2022 that behalf execute an agreement of sale and grant a Power of Attorney empowering the developer to execute agreements of sale or conveyances in regard to individual plots of land or undivided sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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