2018 (10) TMI 1935 - AT - Income Tax

Addition as income of assessee representing consideration said to have been received by the assessee under development agreement - Development right agreement with Bengal Shelter Housing Development Ltd - whether agreement does not fall u/s. 53A of Transfer of Property Act r.w.s 2(47)(v) of the IT Act 1961 in the absence of registration of JDA having been executed after amendment came into force? - HELD THAT - As decided in the case of Balmir Singh Maini 2017 (10) TMI 323 - SUPREME COURT when there is no income on a transaction which never materialized is at best a hypothetical income which cannot be brought to tax. Therefore respectably following the decisions above referred to and discussed in the aforementioned paragraphs the addition made by the AO as confirmed by the CIT-A is deleted. Ground no s 1 and 2 raised by the assessee are allowed. Addition made u/s 40A(3) - AO found that assessee paid registration fee in cash above Rs. 20, 000/- - HELD THAT - The assessee explained the said payments made for registration of land and flats and such cost includes stamp duty and registration cost. The assessee also filed evidences in support of its contentions and submitted the said payments does not attract the provision Sec. 40A(3) - But it is noted from the record that the AO disallowed such amount by observing the assessee did not furnish any valid or tenable explanation - CIT(A) held the payment has to be directly paid to the government s account and rejected the contention of assessee and confirmed the addition made by the AO. Before us the Ld. AR pointed to page No.48 of the paper book and referring to the transactions at Sl. No. 12 and submitted that the major portion of said addition was made towards stamp duty cost and only minor portion is belonging to other expenditures - AR further referred to page No.s 58 59 of the paper book to show the said amount has reflected at Sl. No.12 at page No.48 of the paper book was being paid towards stamp duty under TR Form No.7 which is a challen for depositing of money in the account of Govt. of West Bengal. Likewise it is seen from the pages 48 to 91 of the paper book which supports the contentions of the Ld AR. - DR did not controvert the same - assessee carried on transactions with two parties showing the reimbursements of expenses in connection with registration of flats / properties at Beharampur. Considering the submissions of Ld AR facts and circumstances of the case and evidence available on record from pages 48 to 91 of the paper book we find force in the contentions of Ld AR therefore the addition made by the AO has confirmed by CIT(A) is deleted. Thus ground No. 3 raised by the assessee is allowed. Addition being paid to Beharmpur Municipalities on account of business proficiency - HELD THAT - The said payment was authenticated by the Chairman Behrampur Municipality by affixing revenue stamp. But however no submissions were made before us as well as before authorities below in terms of Rule 6DD of the Income Tax Rule 1962 and in the absence of such evidence covering the exception provided under Rule 6DD of the IT Rules we find no infirmity in the order of CIT(A) and it justified. Thus ground No.4 raised by the assessee is dismissed.

Summary

Issues Involved:
1. Confirmation of addition of Rs. 49,92,73,606/- as income under a development agreement.
2. Confirmation of addition made under Section 40A(3) of the Income Tax Act.
3. Confirmation of addition paid to Beharampur Municipality on account of business proficiency.

Issue-wise Detailed Analysis:

1. Confirmation of Addition of Rs. 49,92,73,606/- as Income under Development Agreement:
The core issue was whether the amount of Rs. 49,92,73,606/- received under a development agreement should be treated as income for the assessment year 2009-10. The Assessing Officer (AO) relied on a letter dated 23-12-2011, interpreting it as an admission that possession of land was handed over to the developer, thereby treating the total consideration of Rs. 50.17 crore as income. However, the Tribunal found that there was no admission in the said letter that possession was handed over. The agreement dated 31-03-2009 stipulated that possession would be handed over only upon receipt of the full consideration, which did not occur as the agreement was canceled by a deed of cancellation dated 28-12-2011. The Tribunal also noted that the amounts received were returned to the developer through cheques, indicating no income was accrued or received. The Tribunal cited the case of Shri Harder Singh and the decision of the Punjab & Haryana High Court in C.S. Atwal, emphasizing the necessity of registration for agreements post-24-09-2001 to invoke Section 53A of the Transfer of Property Act and Section 2(47)(v) of the Income Tax Act. Since the agreement was not registered, it did not fall under these provisions, and thus, no capital gains tax was applicable. The Tribunal concluded that the addition made by the AO was not maintainable and deleted it.

2. Confirmation of Addition Made under Section 40A(3) of the Income Tax Act:
The AO disallowed certain payments made in cash exceeding Rs. 20,000/-, which were related to registration fees for land and flats, invoking Section 40A(3). The assessee argued that these payments were for stamp duty and registration costs, which do not attract the provisions of Section 40A(3). The Tribunal found that the payments were indeed made towards stamp duty and were reflected in the government’s account through TR Form No.7. The Tribunal noted that the evidences provided by the assessee supported their claim, and the payments were made directly to the government. Therefore, the Tribunal deleted the addition made by the AO and confirmed by the CIT(A).

3. Confirmation of Addition Paid to Beharampur Municipality on Account of Business Proficiency:
The AO disallowed a payment of Rs. 1,75,000/- made in cash to Beharampur Municipality, as the assessee did not provide a valid explanation. The assessee claimed the payment was a donation made in the course of business. However, the Tribunal found that the payment was made in cash and did not fall under any exceptions provided under Rule 6DD of the Income Tax Rules. Consequently, the Tribunal found no infirmity in the CIT(A)’s order confirming the addition and upheld the disallowance.

Conclusion:
The appeal was partly allowed. The Tribunal deleted the addition of Rs. 49,92,73,606/- and the disallowance under Section 40A(3) but upheld the addition of Rs. 1,75,000/- paid to Beharampur Municipality.