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TMI Blog2015 (7) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... will be shared between the L & T and assessee as per the ratio defined in the joint development agreement dated 19.10.1995, which clearly means that the assessee is entitled to 25% of the profit earned by utilizing 7575.37 square meters of FAR relatable to 1 acre 6 guntas of land. However, curiously another letter came to be issued by the L & T on 4.7.2005 mentioning that the amount of ₹ 3.15 crores paid to the assessee is in the nature of advance. Such letter is clearly an after thought inasmuch as, the search was made in the year 2004 and this self-serving letter written by the L & T to protect the assessee from tax liability by any stretch of imagination cannot be said to be reliable. Thus, the explanation of the L & T deserves to be rejected as the same is after thought. We concur with the opinion expressed by the Assessing Officer and Appellate Commissioner that the assessee has surrendered FAR to an extent of 7575.37 square meters in respect of 1 acre 6 guntas exclusively held by him in favour of the L & T and has earned ₹ 3.15 crores as advance in that regard. We have already clarified that surrendering of the said FAR by the assessee in favour of the L & T a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35 acres and 6 guntas is 2,61,912.30 square meters. Out of the same, FAR relating to 1 acre 6 guntas would be 8589.53 square meters. Out of the total extent of 35 acres 6 guntas of land, an area of 34 acres was the subject matter of Joint Development Agreement dated 19.10.1995 entered into between the respondent and the Larsen Tourbo Limited ('L T' for short). The remaining extent of 1 acre 6 guntas of land was not covered under the Joint Development Agreement entered into between the parties. Admittedly, the said area of 1 acre 6 guntas of land was kept by the respondent for his personal use i.e., for construction of his residential house. In respect of the assessment year 1999-2000, the assessee filed return of income on 14.2.2000 declaring total income of ₹ 4,90,000/-. The assessment under Section 143(3) of the Income Tax Act ('the Act' for short) came to be concluded determining the total income at ₹ 5,20,000/-. A search came to be conducted in the premises of Assessee under Section 132 of the Act on 4.2.2004. Certain documents were seized. It was found from the seized records that the income earned from the Joint Development Agreement entered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' for short} in Appeal No. ITA 315/ACIT.Cen.Cir.2(3)/CIT(A)-VI/2005-06/BLR vide Annexure-B. The Appellate Commissioner on reappreciation of the entire material on record concluded that the relinquishment of FAR of 7575.37 square meters by the assessee in favour of the L T comes within the definition of transfer as found in Section 2(47) of the Act and therefore the Appellate Commissioner held that the capital gains have arisen to the assessee. Consequently, the Appellate Commissioner upheld the addition of ₹ 2,48,45,970/- under the head of 'capital gains'. 6. The orders passed by the Assessing Officer as well as the Appellate Commissioner were carried further in appeal by the assessee before the Income Tax Appellate Tribunal, Bangalore Bench in ITA No.1163/Bang/07. The Tribunal allowed the appeal filed by the assessee and set aside the orders passed by the Assessing Officer as well as the Appellate Commissioner by its order dated 10.10.2008 on the ground that area of 1 acre 6 guntas retained by the assessee is not a capital asset and it was not transferred by the assessee in favour of Developer and there was no transfer of immovable property as defined under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had authorized L T (developer) to market all the built up area of South City project and he did not intend to retain any portion thereof for himself. 8. The income arising from 34 acres which was the subject matter of the joint development agreement has been shown under the head income from business in assessment year after assessment year. However the income earned out of the rest of 1 acre 6 guntas of land had not been shown at all by the assessee in any of the assessment years. According to the assessee, there is no need to show such income as it was a non-taxable capital asset. Admittedly, 1 acre 6 guntas of land was kept by the assessee for his personal use. During the course of search as mentioned supra, the documents were seized, which depicted that the assessee had also received income from L T by entering into a joint development agreement in respect of 1 acre 6 guntas of land also by surrendering FAR. The relevant portions of the seized documents containing aforementioned particulars are reproduced in the order passed by the Appellate Commissioner as well as in the order of the Assessing Officer. 9. We have carefully perused the relevant portions as depicted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is FAR to an extent of 7575.37 square meters in respect of the land measuring 1 acre 6 guntas held by the assessee, though same was not the subject matter of the joint development agreement entered into on 19.10.1995. 11. As aforementioned, by way of an amended plan approved during the previous year relevant to the assessment year 1999-00, the assessee was eligible for an FAR of 8589.53 square meters. The records make it clear that the assessee as per the plan decided to retain FAR only to an exent of 1014.16 square meters for his residence and surrendered the balance of 7575.37 square meters in favour of developer (L T) for construction of flats. Therefore there is a transfer within the meaning of Section 2(47) of the Act since the assessee has surrendered FAR of 7575.37 square meters. The word, 'transfer' as defined under Section 2(47) of the Act in relation to a capital asset includes the sale, exchange or relinquishment of the asset or the extinguishment of any rights therein. In the matter on hand, the assessee has relinquished his rights over the FAR to an extent of 7575.37 square meters and consequently his right in FAR relating to his plot of 1 acre 6 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act inasmuch as the words employed in sub-clause(1) is sale , exchange , or relinquishment and under subclause ( 2) the words employed is extinguishment of any rights therein . The said definition is an inclusive definition. The expression must be read widely and not narrowly. It denotes extension and cannot be treated as restricted. A transaction whereunder the right to exclusive possession and enjoyment stood transferred, even subject to right of reversion in favour of the transferor would be covered by this section. In that view of the matter, we are of the considered view that the transaction in question namely transfer of capital asset i.e., an extent of 7575.35 Sq. Mtrs. of the total extent of FAR which related to 1.6 acres of land retained by the assessee to the developer (L and T) would stand fully covered by the definition clause of section 2(47) of the Act. 14. The search as aforementioned came to be conducted on 4.2.2004 wherein number of vital documents were found against the assessee and L T. Even thereafter a letter dated 7.6.2005 as mentioned supra came to be written to the assessee (wherein they have enclosed a letter dated 23.9.1999) confirming the ter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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