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TMI Blog2012 (11) TMI 930X X X X Extracts X X X X X X X X Extracts X X X X ..... not right on the part of the authorities to assume a particular income and then bring it to charge on the ground that certain income has accrued or arisen in the case of the assessee. Under sections 22 & 23 of the Income-tax Act when income is assessed under the head Income from house property”, the Act specifically provides for deeming of income No such parallel provision is available when income is assessed under other heads. The addition made by the A.O on account of short term capital gain of Rs. 2,31,47,564, is purely notional neither accrued nor received by appellant and not in accordance with the judicial precedents and the same is deleted - Decided in favor of assessee. - ITA no. 1233/Mum./2010 - - - Dated:- 13-1-2012 - SHRI B.R. MITTAL AND SHRI J. SUDHAKAR REDDY, JJ. Revenue by : Mrs. Mithali Sridharan Assessee by : Mr. Vijay Mehta ORDER PER J. SUDHAKAR REDDY, A.M. This appeal preferred by the Revenue, is directed against the impugned order dated 4th December 2009, passed by the Commissioner (Appeals)-XVIII, Mumbai, for assessment year 2005-06. 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % of stake by Naman Dev. Area of Plot (sq.mtrs.) C-30 Naman BKC Construction Pvt. Ltd. (NCPL) 90% 10% 4556 C-31 Naman BKC Realtors Pvt. Ltd. (NRPL) 30% 70% 3443 C-32 Naman BKC Properties Pvt. Ltd. (NPPL) 10% 90% 3443 4. SRL and NDL executed joint venture agreement in respect of each of the SPV entity. As per the joint venture agreement, (i) both SRL and NDL had an obligation of contributing proportionately, premium amounts as well as construction cost in the event of the concerned joint venture company, decided to undertake development of the project; (ii) neither SRL nor NDL can offer its share holdings in the SPV for sale to any other persons, without the consent in writing of the other shareholder; (iii) in the event of the majority partner in the SPV deciding to exit from the project, thEn the majority partner could compel the minority partner to exit in favour of a new purchaser; (iv) if a minority share holder IN THE SPV is not desirous of meeting its obligation under the agreement, then it is required to offer its minority shareholding, to the majority shareholder at par, in case the majority shareholder was willing to und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the income from sale of shares should not be treated as capital gains and interest should not be assessed under the head income from other sources as under: On verification of the audit report at para no.8, it is mentioned that you are engaged in the business of construction of building and developments, sales and delaying in real estate whereas in the profit and loss account you have shown sale of shares and net gain thereon at Rs.7.65 crores and interest on loan at Rs.16,09,563/- and debited various expenditure under various heads treating the same as business expenditure and business income. Show cause why the income on account of shares should not be assessed as income from capital gains and interest under the head income from other sources. 6. Subsequently, after considering the contentions of the assessee, the assessing officer held that the assessee has not earned profit out of any regular activity which may be termed as business . He observed that for the assessment year 2004-05, no income had been declared by the assessee in view of the fact that construction activity of the assessee has not commenced. According to the Assessing Officer, the assessee participate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... altors (F) Ltd and M/s.Naman BKC Properties (F) Ltd. which held the rights to purchase and develop plots no. C-32 and C-33 respectively, although the transaction of sale of shares held by you in M/s.Naman BKC Constructions P Ltd on the same date was done at a premium of Rs. 860 per share as against face value of Rs. 10 per share. 4.2 The assessee replied vide letter dated 14.12.2007 as under: As submitted to your honour 3,00,000 shares of Naman BKC Realtors Put Ltd (NRPL) and 1000 shares of Naman BKC Properties Put Ltd (NPPL) have been transferred by us to SS Infrastructure P Ltd(SSIFL) and S S Buildcori P Ltd (SSBPL)at par value. In this regard we have already furnished copies of shareholders agreements dated 17th September 2004 as are applicable to NRPL and NPPL, We draw your particular attention to the clause no.11 from the shareholders agreement dated 17th September, 2004 as relevant to NRPL. In the event of default in providing timely funds to the company(NRPL) for the purpose specified herein by Sunshine for any reason whatsoever then Naman shall have first option to takeover/acquire all the equity share holding of Sunshine in the said Company(NRPL)in the name of its n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee to Shree Naman Developers Ltd are self serving pieces of evidence in support of its claim. It has been held by the Hon ble Supreme Court in the case of CIT Vs Durga Prasad More reported in 82 ITR 540 that in a case where the party relies on self serving recitals in a document, it is for that party to establish the truth of these rentals and the Assessing Officer can look beyond such self serving documents. It was also held in the case of Sumati Dayal Vs CIT reported in 214 ITR 81 by the Hon ble Supreme Court held that conclusion arrived at after considering the surrounding circumstances and applying the test of human probabilities was correct in the income-tax proceedings. The assessee s explanation is not acceptable as it is clear from the transactions carried out with K Raheja Corporation P Ltd that the plots of land namely C 30, C-3 1 C-32 commanded premium over and above the price charged by the MMRDA for the above plots. The assessee s contention that it had to withdraw from the proposed plan of developing plot nos C-31 C-32 because of lack of funds is not acceptable because it is a known fact that the plot of land was easily saleable at a higher price. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Assessing Officer has not brought any material on record that the assessee had received any additional amount over and above the amount recorded in the books of account. She relied on a number of case laws and upheld the contentions of the assessee. Aggrieved, the Revenue is in appeal before the Tribunal. 13. Learned Departmental Representative, Mrs. Malathi Sridharan, representing the Revenue, took this bench through the facts of the case and submitted that she is not strongly disputing the findings of the Commissioner (Appeals) that the income in question is assessable under the head Income From Business . Nevertheless, she submitted that the reason given by the Commissioner (Appeals) for coming to a conclusion that the income in question is to be assessed under the head Income From Business , is factually incorrect. She referred to the joint venture agreements and argued that the findings of the Commissioner (Appeals) that chronology of the events clearly indicate that the assessee had no intention to construct buildings on any of the plots allotted by the MMRD, was factually incorrect. She pointed out that the very purpose of entering into a joint venture forming SPVs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roup and the efforts of both the parties fructified in the allotment of plots on 24th August 2004. He pointed out that three joint ventures SPVs were allotted plots of land on 24th August 2004, and the shares were allotted on 19th September 2004 and five days thereafter i.e., on 23rd September 2004, the assessee has sold the shares to K. Raheja Corp. Pvt. Ltd. He submitted that the entire process clearly demonstrates that what was earned was income from business and not income under the head Capital Gains . He contended that the value of shares allotted to the assessee company at par on 19th September 2004, was the same, as the value of shares sold on 23rd September 2004, as there was no great development within a period of five days. He submitted that the culmination of assets over a period of time resulted in the assessee s earning profits. He pointed out that the expenditure claimed was minimal. 16. On ground no.2, the learned Counsel submitted that nowhere in the assessment order, there is a finding that the assessee company has received or was to receive any amount in excess than what is recorded in the books of account. Thus, he submitted that when there is not even an all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spute that the assessee is a builder and developer as well as a dealer in real estate. The assessee along with the Naman group ventured jointly to bid for the allotment of plots of land at MMRDA. The joint bidding was successful and three plots were allotted. The modus-operandi adopted by the joint bidders was to float three SPVs in the form of companies and to obtain the allotment of land in the name of these companies. Shares were allotted to them in these companies and within five days of allotment, the assessee along with its joint bidders i.e., Naman group sold their shares in SPVs entity NCPL to K. Raheja Corp. Pvt. Ltd. From the above facts, it is clear that what was undertaken by the assessee was a business activity and not an investment in a capital asset. As the Revenue has not strongly disputed the findings of the Commissioner (Appeals), and the conclusions drawn by her on this aspect, we do not elaborate further on this issue. Suffice it to say, we uphold the conclusion of the Commissioner (Appeals) and dismiss ground no.1, raised by the Revenue. 21. Coming to ground no.2, which is on the issue of taxability of notional income, we find that the undisputed facts are th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or accruing as a result of a transfer of the capital asset. The first appellate authority had rightly observed that what in fact never accrued or was never received cannot be computed as capital gain. He rightly held that it is manifest that the consideration for the transfer of capital asset is what the transfer receives in lieu of assets he parts with, i.e., money or monies worth and expression full consideration cannot be construed as having reference to the market value of the assets transferred but refers to the price bargained for by the parties and it cannot refer to the adequacy of the consideration. He also rightly observed that the legislature has used the words full value of the consideration and not fair market value of the assets transferred . He recorded that the Assessing Officer has not brought on record any material to show that the assessee has received more than what has been disclosed in the books and under these circumstances the difference cannot be brought to tax under the head Capital gains . The Tribunal fully agreed with these findings and the appeals filed by the revenue failed. India Finance and Construction Co. P. Ltd. v/s DCIT, 200 ITR 710 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Anu Developers Pvt. Ltd., wherein, one of us (A.M) is a party, it was held as follows:- 8. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and on perusal of the papers on record and the orders of authorities below as well as the case laws cited we hold as follows. 8.1 The undisputed fact is that the assessee has not charged any rent from Balaji International School. it is not a case of suppression of income. The other undisputed fact is that the school itself has commenced its activity from the impugned assessment year 2002-03. When the assessee has not charged or earned any income during the impugned assessment year, in our considered opinion, it is not right on the part of the authorities to assume a particular income and then bring it to charge on the ground that certain income has accrued or arisen in the case of the assessee. Under sections 22 23 of the Income-tax Act when income is assessed under the head Income from house property , the Act specifically provides for deeming of income No such parallel provision is available when income is assessed under other heads The Honbie Gauhati High Court in the case of Keshrichan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Mcdowell Co (supra) we find that M/s Balaji International School has not earned any income either for the financial year ended 31-03-2003 or 2004 and thus the question of diverting taxable income to non taxable entities simply does not arise. Tax cannot be levied on income on the ground that the assessee ought to have earned this income. In view of the above discussion we allow ground 1 of the assessee and delete the addition in question. 26. Applying the propositions laid down in the case laws cited above to the facts of the present case, we uphold the following findings of the Commissioner (Appeals). 7.8 It is legally well settled that what is to be taxed under the Act, is the income which is accrued or received. No notional income can be brought to tax. Similarly, the income which the assessee could have received but not received is also not taxable in absence of any material brought on record by the A.O. that additional amount is received over and above the amount recorded in the books of account. 7.9 In view of the above discussion, the addition made by the A.O on account of short term capital gain of Rs. 2,31,47,564, is purely notional neither accrued nor rece ..... X X X X Extracts X X X X X X X X Extracts X X X X
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