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TMI Blog2010 (5) TMI 575X X X X Extracts X X X X X X X X Extracts X X X X ..... ps/flats and in the years of sale by the assessee, the correct area and value be directed to be considered - Appeal is partly allowed - IT APPEAL NO. 4629 (MUM.) OF 2007 - - - Dated:- 7-5-2010 - R.S. SYAL, SMT. ASHA VIJAYARAGHAVAN, JJ. Peeyush Jain for the Appellant. K. Shivaram and Paras Savla for the Respondent. ORDER R.S. Syal, Accountant Member. This appeal by the revenue is directed against the order passed by the Commissioner of Income-tax (Appeals) on 11-4-2007 in relation to the assessment year 2004-2005. 2. The first ground is against the deletion of addition of Rs. 1,73,45,250 on account of value of immovable property as consideration on transfer of development rights held by the CIT(A) to be taxable on actual transfer. Briefly stated the facts of the case are that the assessee was carrying on the business of developing housing projects at the material time. The factual matrix of this ground, as recorded by the Assessing Officer on page 4 onwards is as follows. The assessee entered into deed of partnership on 17-4-2003 with Shri Mohan Jethalal Singhani, Chandu Jethalal Singhani, Purushotam Jethalal Singhani and Narsi Amritlal Singhani under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 residential flats bearing Nos. 1104, 905, 605 502 admeasuring about 1156, 1181 1489 sq.ft. of super built up area respectively and 5 car parking space in respect of these flats. Thus total area in the form of shops and flats at 7707 sq.ft. was in substitution of 10,000 sq.ft. agreed earlier to be allotted to the assessee as per the Retirement deed dated 28-3-2003. In the return of income, the assessee showed sale price of Rs. 54.25 lakhs in its profit and loss account. In this backdrop of facts, the Assessing Officer opined that the assessee had transferred development right in Ghatkopar plot through a route of formation of partnership firm and then subsequently retiring within 11 days time. The Assessing Officer called upon the assessee to explain as to why the value of the premises of 7707 sq.ft. should also not be treated as a part of sale consideration to arrive at the profit from the project. The assessee's Chartered Accountant appeared before the Assessing Officer, who argued that the assessee would be entitled to shops/flats only after the completion of the project and hence the income on this count be considered for taxation only when these are actually allotted. Late ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxability in respect of area of 7,709 sq.ft. would arise only when the flats were handed over after construction and not before that. The Revenue has come up in appeal against the view taken by the learned CIT(A) on this issue. 3. We have heard the rival submissions and perused the relevant material on record. The factual position, in nutshell, is that the assessee was builder and acquired rights over Ghatkopar plot. He entered into partnership on 17-4-2003 with four other parties. The assessee retired from said firm after a gap of 11 days on 28-4-2003. He received a sum of Rs. 54,25,000 inclusive of the development expenses incurred by him and also rights in shops and flats to be constructed with total area of 7,707 sq.ft.. The Assessing Officer held that the introduction of the assessee in the partnership firm and his retirement was a cloak for giving a different look to the real transaction of sale of the rights in Ghatkopar plot by the assessee to such four persons. In order to appreciate the controversy before us in right perspective it will be apposite to find answer to the question of genuineness or otherwise of the assessee joining and retiring from the firm. Whether a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such income is taxable 5. It is noted that the assessee voluntarily offered a sum of Rs. 30,61,451 (Rs.30 lacs plus Rs. 61,451 representing the difference between Rs. 24,25,000 and Rs. 23,63,549 being the excess of receipts over actual expenditure on development) for taxation under the head 'Profits and gains of business or profession'. The Assessing Officer came to hold that a sum of Rs. 1.73 crore and odd, being value of shops/flats was also liable to be added under the head 'Profits and gains of business or profession'. In the first appeal it was argued on behalf of the assessee that only a sum of Rs. 61,451 be regarded as business income and the remaining amount of Rs. 30 lakhs be assessed under the head 'Capital gains'. The learned CIT(A) bifurcated his finding qua the assessment of income from this transaction in two parts. In para 6.6 he held that the entire amount of Rs. 30,61,451 which was income on conversion of stock-in-trade/introduction of capital asset into firm was to be assessed as 'business income'. About the second part, he held in paras 6.7 to 6.9 of the impugned order that the assessment of income on retirement of partner i.e. retirement consideration was to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the first appellate authority had not given any decision on the correct area and the aspect of valuation in view of his decision that income on this account would arise only when property is handed over to the assessee or subsequently sold. It was, therefore, contended that no addition be made in this year on account of the value of shops/flats and in the years of sale by the assessee, the correct area and value be directed to be considered. 9. The first issue for our determination here is whether value of shops/flats to be allotted to the assessee at a future date are liable to be considered as sale consideration of the rights in Ghatkopar plot and hence assessable to tax at the time of sale. As we have noted above that these rights constituted stock-in-trade of the assessee, naturally profit arising on transfer of such rights shall result into income accruing to the assessee in this year. We do not find any force in the view canvassed by the ld. first appellate authority as reiterated by the learned A.R. that the value in respect of shops/flats cannot be made subject matter of taxation in the current year because it shall accrue later on. It is seen that the assessee tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adopting area of 7,709 sq.ft. as the part of the sale consideration. He pleaded that the actual area allotted to the assessee was less. In support of his contention he tried to place reliance on some additional evidence, being the payment actually received by the assessee on sale of such properties in the later years. We are not inclined to disturb the finding of the Assessing Officer about the area of 7,707 sq.ft. allotted to the assessee for the reason that Supplementary deed dated 25-4-2006, a copy of which is available at pages 66 onwards of the paper book, clearly indicates that the assessee shall be allotted 3 shops admeasuring in aggregate 900 sq.ft. of super built up area and 8 residential units admeasuring about 225 sq.ft. of carpet area each in Rehab building No. 3 and also 4 residential flats admeasuring about 1156, 1181 1489 sq.ft. of super built up area respectively. The total area of such shops/flats comes to 7,707 sq.ft. which figure has been adopted by the Assessing Officer. We, therefore, do not find any force in the submission of the learned A.R. on this issue, which deserves the fate of dismissal. 11. Another aspect of this issue which has been argued by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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