2010 (11) TMI 1045 - AT - Income Tax

Summary

Issues involved: Appeal against deletion of addition made by Assessing Officer of Rs. 74,17,895/- on protective basis u/s 'capital gain'.

Summary:

Issue 1: Background and Assessment by AO
- The assessee, a co-operative society managing common affairs of 14 societies, filed return showing income from property, business, and other sources for AY 2004-05.
- AO found society's role was to manage common lands, collect funds, and incur common expenses.
- AO considered amount received for transfer of plot as capital gains in assessee's hands, despite society's claim that it was received for 14 member societies.

Issue 2: CIT(A)'s Decision
- CIT(A) noted conveyance deed between Police Officers' society and 14 society members for Rs. 77,14,920/-.
- After deducting expenses, balance of Rs. 74,17,895/- was credited to 14 societies' accounts.
- CIT(A) held that if cost of acquisition as of 1.4.1981 was considered, there would be a net capital loss.
- Deleted addition of capital gains on protective basis in assessee's assessment.

Issue 3: Appeal by Revenue
- Revenue contended that assessee practically owned the plot and should be assessed for capital gains.
- Assessee argued it was not the owner of the plot and no transfer occurred, hence no capital gains should be assessed.

Issue 4: Tribunal's Decision
- Tribunal upheld CIT(A)'s decision, stating the plot was owned by 14 housing societies, not the assessee.
- Byelaws and documents supported that the assessee was managing the plot on behalf of the societies.
- No ownership transfer to the assessee was found, and accounting entries reflected distribution of sale proceeds to 14 societies.
- Tribunal affirmed CIT(A)'s decision for different reasons and dismissed revenue's appeal.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the addition of capital gains on a protective basis in the assessment of the co-operative society, as it was found that the society was managing the plot on behalf of the 14 member societies and did not have ownership rights over the property.