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TMI Blog2013 (12) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... to the transaction of the assessee, where the parties were interrelated and the assessee was involved in tax evading methods – Decided against assessee. - ITA No. 1036/Hyd/2010 - - - Dated:- 18-1-2013 - SHRI CHANDRA POOJARI AND SMT. ASHA VIJAYARAGHAVAN, JJ. For the Appellant : Sri V. Shiva Kumar For the Respondent: Sri K. Gyana Prakash Order Chandra Poojari (Accountant Member).- This appeal by the assessee is directed against the order of the Commissioner of Income-tax (Appeals)III, Hyderabad dated May 13, 2010. 2. The assessee raised the following grounds of appeal : 1. The order of the Commissioner of Income-tax (Appeals)-III, Hyderabad, dated May 13, 2010 is contrary to law, facts of the case and devoid of any merit. 2. (a) The Commissioner of Income-tax (Appeals) is not justified in sustaining the action of the Assessing Officer in computing the long-term capital gains taking the amount of Rs. 2,66,26,000 (comprising of forfeited deposit of Rs. 2,00,00,000 and Rs. 66,26,000 received towards damages) as sale consideration. (b) The Commissioner of Income lax (Appeals) failed to see that the said amount was received towards can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss at Rs. 34,44,373, as shown in the original return. 4. During the assessment proceedings, the Assessing Officer noted that earlier the assessee has entered into a development agreement with Sri Gourisanker Gupta, Smt. Saritha Gupta and M/s. Vansh Builders, for development of the property situated at 8-3-949/1, Punjagutta, (Ameerpet), Hyderabad, admeasuring 7236 sq. yds, vide agreement dated December 26, 2001. Later, the said agreement was cancelled and the assessee has entered into an agreement of sale and irrevocable power of attorney on February 18, 2005 with M/s. G. S. Builders P. Ltd., for a total consideration of Rs. 13 crores. This agreement was registered with Sub-Registrar, Hyderabad, on the same date. He further noted that the original developers, i.e., Sri Gourisanker Gupta, Smt. Saritha Gupta and M/s. Vansh Builders and M/s. G. S. Builders P. Ltd., belong to the same group. Sri Gourisanker Gupta and Smt. Saritha Gupta are directors in M/s. G. S. Builders P. Ltd. He referred to the details of payment amounting to Rs. 13 crores made by the said company, as per the said agreement of sale and irrecoverable power of attorney dated February 18, 2005 and further observing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s additional compensation. From the above, the Assessing Officer noted that the assessee has received total amount of Rs. 15,77,26,000 against the said land. Accordingly, during the assessment proceedings, he has asked the assessee to explain as to why the said amount shall not be considered as the total sale consideration for computing the capital gain in this case. However, as noted by him, the assessee has not furnished any reply up to December 30, 2008. He further noted, that even the assessee has not admitted any capital gains from transfer of the said property in the return filed for the assessment year 2008-09. 7. Under the above circumstances, after referring to the provisions of section 2(47) of the Act and the decisions of the hon'ble Madras High Court in the case of D. Kasturi v. CIT [2001] 251 ITR 532 (Mad) and in the case of CIT v. K. Jeelani Basha [2002] 256 ITR 282 (Mad) and after observing that since there was a transfer of the said property within the meaning of the said section during the previous year, the Assessing Officer held that the capital gains arising from sale of transfer of the said property shall be assessed to tax in the hands of the assessee for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loper did not complete the construction within the specified time of 30 months as agreed in the development agreement. 11. He submitted that on February 18, 2005, a tripartite agreement, i.e., agreement of sale and irrevocable power of attorney was entered into between the assessee as owner along with developers Smt. Saritha Gupta and M/s. Vansh Builders are second party in favour of M/s. G.S.G. Builders P. Ltd. (purchaser) as a third party, for handing over the site with construction up to that date for which the assessee has received consideration of Rs. 13 crores. In the said agreement, it was further agreed that the said interest-free deposit of Rs. 2 crores given to the assessee by the said developers shall be forfeited by the assessee. Referring to clauses (vi) and (vii) of the said agreement, the authorised representative submitted that the earlier development agreement entered into by the assessee with the developers stood cancelled and the assessee forfeited the deposit of Rs. 2 crores given by the developers, in view of the fact that they have not complied with the terms of development agreement. Further, the developers have also paid Rs. 16,26,000 and Rs. 50,00,000 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee as sale consideration, in addition to the sale consideration already paid. The authorised representative further submitted that such amount received on February 28, 2008, cannot be considered as part of sale consideration for the purpose of computing capital gains in the assessment year 2005-06. The authorised representative contended that the said aggregate amount of Rs. 2,66,26,000 (Rs. 2 crores + Rs.66,26,000) cannot be considered as part of sale consideration. The authorised representative further stated that the said amounts are in the nature of capital receipts. He contended that the same cannot be considered as received towards sale consideration. 13. Further referring to the alternative submission of the Assessing Officer, after referring to the provisions of section 51 of the Act, the authorised representative submitted that the hon'ble Supreme Court in their decision in the case of Travancore Rubber and Tea Co. Ltd. v. CIT [2000] 243 ITR 158 (SC), held that earnest money/deposit, forfeited for non-performance of a contract is not a revenue receipt, but only capital receipt. Therefore, applying the provisions of section 51 of the Act, after deducting Rs. 2 cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moreover, it is only an internal arrangement that the said property was ultimately purchased in the name of the above company M/s. G.S.G. Builders P. Ltd., in which Sri Gourisanker Gupta and Smt. Saritha Gupta are directors. It is also pertinent to mention here M/s. G.S.G. Builders P. Ltd., to whom the above property has been sold by the assessee, was also a developer in respect of the said property, as per the earlier development agreement-cum-general power of attorney dated December 26, 2001. 16. The Departmental representative submitted that the assessee has objected to consideration of the said amount of Rs. 2 crores given earlier by those developers as a refundable interest-free deposit, but retained by them following the said agreement of sale dated February 18, 2005, as part of the sale consideration by the Assessing Officer, stating that forfeiture of the said amount was for non-performance of contract by the developers within the stipulated time. It is their contention that the same cannot be considered as part and parcel of sale consideration. He submitted that vide clause (vi) of the said agreement of sale dated February 18, 2005, while cancelling the earlier developm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt received of Rs. 15,76,26,000 as "advance against sale of property". The said amount is shown on that account under "current liabilities" in schedule-10 to the balance-sheet. He further submitted that the said page of the original balance-sheet document filed with the return, is signed by the auditor in this case as well as the concerned director of the assessee-company. Under these facts and circumstances, i.e., when the assessee itself has admitted the entire amount of Rs. 15,76,26,000 as towards consideration for sale of property, how can the assessee contend now that the said amount of Rs. 2,66,26,000 comprising sums of Rs. 2 crores and of Rs.66,26,000 does not constitute part of sale proceeds ? He submitted that under the above facts, already on record, such contention of the assessee is devoid of any merit. He further mentioned that the said additional amount of Rs. 66,26,000 which were paid by the said developers vide cheques dated January 11, 2005 and February 15, 2005 have not been admitted by the assessee in the said agreement of sale dated February 18, 2005. The Departmental representative submitted that from the dates of such cheques, it clearly shows that the same w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee originally entered into development agreement with the parties (1) Sri Gourisanker Gupta, (2) Smt. Sarita Gupta and (3) M/s. Vansh Builders. The agreement was for development of property admeasuring 7236 sq. yds. situated at 8-3-949/1, Punjagutta, Hyderabad, on December 26, 2001. This agreement was said to be cancelled and another agreement of sale and irrevocable power of attorney was entered on February 18, 2005 with M/s. G. S. G. Builders P. Ltd., for total consideration of Rs. 13 crores. This agreement was registered with Sub-Registrar, Hyderabad on February 18, 2005. It is to be noted that Mr. G. S. Gupta and Smt. Sarita Gupta are the directors of M/s. G.S.G. Builders P. Ltd., and M/s. Vamsh Builders. Thus, it is evidenced that they belong to the same group and there is internal relationship between the parties. Through agreement dated February 18, 2005 the assessee received the consideration as follows: (Rs.) 27.7.2004 to 6.1.2005 6,00,00,000 17.2.2005 (a) 6,50,00,000 (b) 50,00,000 Total 13,00,00,000 23. The assessee also received an amount of Rs. 2,66,26,000 vide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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