2024 (10) TMI 22 - AT - Income Tax

Income from sale of three flats - ownership and taxation of the sale consideration from three flats under a Joint Development Agreement (JDA) - real owner. HELD THAT - We note that the AO had called for the financials and books of accounts of the developers (M/s. Foundation One India Pvt. Ltd.), and ascertained that the developer has accounted the sale proceeds in respect of the 3 flats/parties during the AY 2018-19 and has shown the same under the head advance from purchases and the same has been offered as income during AY 2019-20. We further note that the assessee has offered to tax on the undivided share of land and that the developer offered as its income from the sale of three (3) flats. Therefore, on the same transaction (of the 3 apartments in question), the Revenue can t add the same again in the hands of the assessee, which will tantamount to double taxation. In this case, the assessee is the landlord who entered into JDA/PoA with the developer and agreed to give 45% of built up area along with UDS, for 55% of the built up area to the assessee. Accordingly, separate sharing agreement based on the built up area in proportionate to the agreed percentage of share was entered into and accordingly, the flats earmarked for the developer and the assessee respectively. The flats in question fell into the share of the developer and the developer has duly offered the tax on the entire sale consideration as turnover of the developer and hence, the same can t be considered as income of the assessee. Consequently, the addition made can t be legally sustained and therefore, assessee succeeds, and we are inclined to order deletion of the addition made by AO.

Issues:
1. Addition of income in the hands of the assessee by the Assessing Officer.
2. Dispute regarding the ownership and taxation of the sale consideration from three flats under a Joint Development Agreement (JDA).
3. Allegation of double taxation by the Revenue.
4. Validity of the addition made by the Assessing Officer.

Analysis:
1. The appeal was filed by the assessee against the Assessing Officer's order making an addition of Rs. 8,26,79,878 in the assessee's income. The Assessing Officer re-opened the assessment based on alleged sales of flats not considered for income computation. Despite objections and explanations by the assessee regarding a Joint Development Agreement (JDA) with a developer, the Assessing Officer proceeded to add the amount to the assessee's income.

2. The assessee, a Non-Resident Individual, owned property where apartments were built under a JDA with a developer. The JDA specified that the developer would construct and deliver 55% of the Super Built up area to the owner (assessee) in exchange for a 45% share in the property. The dispute arose over the sale consideration of three flats allocated to the developer's share. The developer confirmed to the Assessing Officer that the sale proceeds from these flats were accounted for in their income, not the assessee's.

3. The assessee contended that the sale consideration from the three disputed flats was shown in the books and offered for taxation. The Revenue's attempt to add this amount to the assessee's income would result in double taxation since the developer had already paid tax on the same transaction. The Assessing Officer's Remand Report supported this claim.

4. The Tribunal noted that the flats in question belonged to the developer as per the JDA terms, and the developer had paid tax on the entire sale consideration. Therefore, adding the same amount to the assessee's income would be incorrect and lead to double taxation. The Tribunal ruled in favor of the assessee, ordering the deletion of the addition made by the Assessing Officer.

In conclusion, the Tribunal allowed the appeal filed by the assessee, highlighting the invalidity of the addition made by the Assessing Officer due to the ownership structure and taxation already undertaken by the developer.

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