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TMI Blog2010 (9) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... oduce the questions of law referred for opinion of this Court by the Income Tax Appellate Tribunal (hereinafter referred to as "the Tribunal") in compliance with the order passed by this Court under Section 256(2) of the Income Tax Act ("the Act" in short), we deem it appropriate to state the facts leading to the reference. 2. The land at 15-Barakhamba Road, New Delhi (leasehold land) was originally leased on 31.5.1932 to a partnership firm M/s. Naraindass Hansraj in which late Shri H.R. Vadera was a partner. On that land stood a building which was occupied by the two daughters of Shri H.R. Vadera, viz., Dr. Miss Lila Raj and Dr. Miss Shanti Raj. The firm M/s. Hansalaya Properties came into existence with effect from 08.8.1970 under a deed of partnership executed on the said date between late Shri H.R. Vadera and Mrs. Pushpa Vadera. Two minor children of Mrs. Pushpa Vadera were also admitted to the benefits of the said partnership. As per the said partnership, the business of the assessee was of a constructing a multi-storeyed commercial building on the land situated at 15-Barakhamba Road, New Delhi after demolishing the existing structure. The firm M/s. Naraindass Hans Raj had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... j Vadera and other partners on the respective valuation dates, viz., March 31, 1970 to 1974 were revised keeping in view the value of land at ₹ 36,61,625 as on 08.08.1970, at ₹ 31,81,410, ₹ 40,09,900, ₹ 48,02,950, ₹ 54,17,750 and ₹ 62,74,125 respectively. The revision in the value of the land aforesaid was confirmed in appeals. 3. In the Estate duty proceedings of late Shri H.R. Vadera, the value of the land was also revised by his son and heir Shri Devraj for determining the interest of late H.R. Vadera in the partnership firm wherein the value was revised to ₹ 45,23,800 keeping in view the revision land value as on 08.08.1970 at ₹ 36,61,625. The said revision of was finally accepted after appellate proceedings by valuing the said land at ₹ 45,23,800 as revised by the legal heir. The Income Tax Officer, in his draft order, rejected the revised figure of the cost of land at ₹ 36,61,625 debited by the assessee to its revised consolidated Profit and Loss Account and held that the assessee was entitled only to a deduction of ₹ 2,01,000 as the cost of the land in computing its profit from the venture. This was the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of the fact that the land brought in by late Shri H.R. Vadera as his capital contribution to the assessee was received initially by the assessee as a capital asset and was thereafter converted by it into stock-in-trade, and also on account of the general principles of commercial accounting for determining the real profits of the business, the Assessee was entitled to a debit of ₹ 36,61,625 in its Profit and Loss Account as the cost to it of the land. On account of the above difference of opinion, the following issues were referred to the Special Bench: 1) Whether the assessee firm is entitled to deduction of ₹ 2,01,000 or ₹ 36,61,625 as cost of the land on which the multi-storeyed building was constructed on the following grounds:- (a) Interpretation of Clause 3 of the Partnership Agreement, (b) The land having been brought in by late Shri H.R. Vadera as a stock-in-trade or as a capital asset, and (c) If brought in as a capital asset, then on its being converted into stock-in-trade. 2) Whether there is any evidence of money being charged or so whether addition sustained by the Judicial Member is justified. 6. The Special Bench vide its order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in the assessee's books as the value of the said property. 11. After construction of multi-storeyed commercial building on the said plot of land, which took several years, the Assessing Officer asked the assessee to file consolidated profit and loss account for the entire period from 08.08.1970 to 31.05.1977. Though initially in the consolidated profit and loss accounts in the said period, the assessee debited a sum of ₹ 2,01,000 as cost of land, the revised return was filed in March, 1978 wherein this cost of land was debited by ₹ 36,61,625. It is not in dispute that the revised return was filed well within permissible time. The books of account of Mr. Vadera was also credited with further sum of ₹ 36,61,625 thereby showing his capital as ₹ 36,61,625. 12. In the wealth tax assessment, the property in question was finally taxed at a value of ₹ 36,61,625. Same was the value taken in proceedings under Gift Tax Act as well as Estate Duty assessment while leaving the duty on the estate levy by Mr. Vadera. 13. Notwithstanding the fact that for the purpose of wealth tax charge into the hands of Mr. Vadera, the value of this property was treated at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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