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TMI Blog2016 (2) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... ld the lands in a short span of time to DSK Ltd. during the year relevant to A.Y. 2009-10 for a consideration of Rs. 22,36,57,524/-. (ii) While computing the short term capital gain the assessee has reduced the cost of land of Rs. 11,41,00,474/- and another additional amount stating it to be cost of selling amounting to Rs. 10,79,82,051/- . This cost of selling is the amount refunded by the assessee to DSK Ltd for certain development work to have been undertaken by her. The development work to have been undertaken by her is stated to be for such work such as fencing, removing of debris, excavation, amalgamation of land, leveling of land, mojini, construction of walls, and other related developments. Apparently as per the submission made before the undersigned it appears all these works were to be completed within one year from the agreements to sale. The assessee has not undertaken such work. (iii) In the agreements to sale with DSKD Ltd there is no mention of this cost to be incurred by the assessee, the amount has not been quantified at all. The assessee has submitted the estimate of such work which was prepared by her with the help of officials and technical persons of DSKD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee later to DSKD Ltd. is an afterthought to reduce the liability of short term capital gain. The money refunded by the assessee to the company was prompted by the fact that the proposed SEB project of the company did not materialize, but it in no way can this amount be reduced as cost of selling. Also the money has not been expended by the assessee at all. (viii) The entire scenario of purchase of lands by the assessee and the almost immediate sale within short span of time for huge sums, it is apparent that by purchasing the lands at Rs. 22,36,57,524/-, DSKD Ltd was enhancing the value of lands in its Books and passing the consideration to interested parties, i.e. family members, relatives, members of sister concerns, directors etc. (ix) The assessee has stated in the submissions that the development work was to be carried out by her within one year of the agreements of the sale, but from the submission it is seen the estimate was prepared by her only in January 2009, while she would be required to finish the work by August 2009, when the last agreement of sale is dated August 2008. The estimate was never made before the lands were sold and clearly indicates that it is an af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disposing bunds, laying of compound walls, removing of grass, shrubs, debris, disposing carting away and cleaning, Govt. and private measurement of land etc. In the said MOU various conditions have been mentioned. On the basis of aforesaid MOU, sale deeds were executed between the assessee and DSKDL. The sale deeds include nature of development work that has to be performed by the assessee which was essence of the sale deeds. It was submitted that it is her contractual obligation to perform the work and it is also mentioned that if there is change in proposed project the assessee has to refund the money set apart for development work. The amount was not mentioned separately in the sale deeds for the work to be performed by her since sale deeds are public documents which are open to public at large. However, the nature of work was specifically mentioned in the respective sale deeds as per MOU. Referring to the documents filed in the paper book it was submitted that the clause in Marathi shows that expenses were to be incurred by the seller which is specifically mentioned in all the sale deeds. Thereafter, the assessee prepared estimates for land development work with the help of off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than what the assessee has charged to DSKDL, i.e. Rs. 1.30 crores per acre. It was submitted that the assessee was going to appoint technocrats/engineers to undertake such development work. Therefore, it is not necessary that every developer/contractor should be an expert in the field. It is a business and not a profession. The assessee further submitted that she has purchased the lands from farmers and not from DSKDL and the lands were sold to DSKDL wherein she is a shareholder. Relying on various decisions it was submitted that a part of the consideration to the extent of Rs. 10,79,82,051/-did not accrue to the assessee and it was refunded to DSKDL. Therefore, the consideration for transfer of property must be reduced by the above amount of Rs. 10,79,82,051/- for determining the capital gains u/s.48. It was further submitted that the same issue had come up in the case of D.S. Kulkarni and Co. for A.Y. 2008-09. They had also sold various lands at Fhursingi to DSKDL and made provisions for development work. At that time also the Addl.CIT had issued notice on the same lines and after considering the facts and circumstances of the case he did not make any addition in the said case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is dated 16-08-2007 and there was no mention of the existence of such an MOU till now, i.e. 26-12-2011. The assessee, by way of sale deeds, is under no obligation to undertake the development work claimed by her. The MOU is a self serving document, the veracity of which is in doubt as it is neither a registered deed nor a notarised one, therefore, the MOU prepared on a Rs. 100/- stamp paper and presented for the first time on 26-12-2011 cannot be relied upon. It is merely an understanding between a Public Limited Company entered into with an interested family member. Further, the deed of confirmation produced by the assessee is dated 15-01-2009. The assessee by way of the sale deeds is under no obligation to undertake the development work claimed by her and the same was never quantified in the sale deeds. Therefore, the deed of confirmation filed by the assessee is a self-serving document, the veracity of which is in doubt and it is neither a registered deed nor a notarized one. The AO therefore rejected the claim of refund of money of Rs. 10,79,82,051/- to DSKDL as an allowable expenditure and determined the total short term capital gain of the assessee at Rs. 10,95,57,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of development work to be performed by the assessee whereas the MOU dated 16.08.2007 entered into by the assessee with DSKDL describes the various details of work to be done and various conditions have also been mentioned. The assessee thus submitted that it was a contractual obligation of the assessee to perform the work as per the MOU and Deed of confirmation and in the event of any change of size or specification of project or delay in instruction from DSKDL for development work, the assessee has to refund the money set apart for the said work as per para 3 of MOU and para (ix) of Deed of confirmation. 14. With respect to the notings of the Assessing Officer regarding the DSKDL having enhanced the value of land and passing the consideration to interested parties it was submitted that the proofs relating to the money having been returned by the assessee to DSKDL has been submitted including the JV, Bank statement of DSKDL and affidavit of DSKDL which clearly indicate that the amount kept aside for development work having been refunded and thus the issue of passing of money to the assessee does not arise. The assessee contended that had she not returned the money set apar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered and material on record perused. It is undisputed fact that the appellant has sold various lands to the developers, i.e. DSK Developers who were desirous to purchase about 100 to 120 acres of contiguous land for development of their SEZ projects, which was later on revised to one project of about 250 to 270 after negotiation with the foreign company viz. GTC Cyprus, Netherlands for a joint venture for setting up the SEZ. The Co. i.e. DSK Developer Ltd had even entered into an agreement with the foreign company vide agreement dated 10-7- 2008. It is also seen that the appellant agreed to sell the developed lands at rate approved of Rs. 1.30 crores per acre for a developed land though the fair market value was much low at 4.40 lacs per acre. The developer had offered the appellant such handsome consideration for sale only after the appellant had undertaken to develop the lands which was not an easy task the lands being agricultural and not suitable for SEZ. The appellant had even entered into MOU with the developer on 16-08-2007 whereby the appellant agreed to sell the land with the development as desired and agreed upon by the Company. The appellant only after the execution o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer has failed to consider that the development work on the lands sold by the appellant was a contractual obligation which the appellant was bound to follow lest the deal would not have taken place. The Assessing Officer has thus failed to go into the merits of the expenditure estimation which were to be incurred by the appellant has been rejected outrightly. The Assessing Officer, has also not considered the issue of double taxation which has also been pointed out in the 144A proceedings. The fact which remained and which cannot be ignored while making an assessment is that the Assessing Officer is duty bound to compute the real and correct income and the events till the passing of the order be considered for deciding the case as held in the case of Sushila S. Jhaveri Vs UOI (supra). 4.6. The Assessing Officer has accepted the sales consideration received by the appellant but not considered the other aspects of the matter which included the development work to be carried out by the appellant as the price paid for the agricultural land much higher than the stamp value rate of the area. The Assessing Officer has not at all considered the other part of the transaction whereas i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso contended that the estimate of expenditure to be incurred on the said land was also approved by the company and was intrinsically linked with the transfer though the same has been incurred subsequent to the execution of the sale deed. It has, therefore, been contended that the A.O. had failed to consider that the development work was appellant's contractual obligation and if the said work was not carried out, the company would have recovered the said amount. It is also submitted that various authorities have held that expenditure wholly and exclusively incurred in connection with transfer has to be allowed and it is immaterial that the said expenditure was incurred subsequent to the sale deed. The appellant has relied on the following judicial contentions: 1. V.A. Vasumati vs. CIT (1980) 123 ITR 94 (KER) 2. CIT Vs. Dr.P. Rajendran (1981) 127 ITR 810 (Ker) 3. Kalpataru Construction Vs. DCIT (2007) 13 SOT 194 (Mum) 4. S.S. Jhaveri Vs. Union of India (2006) 286 ITR 428 (Bom). 4.8.1 In the case of V.A. Vasumati, cited supra, the Kerala high Court held that all the expenditure wholly and exclusively incurred in connection with transfer is allowable. This was a case of comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the appellant has carried out a diverse set of development work on the land such as construction of road network in concrete, removing bund, old huts, houses and cleaning grass, shrubs, debris etc. build the compound wall, which has indeed added value to the land for which the sale consideration received by the appellant was much more than the existing price as per the stamp duty valuation. 4.9 Sections 48 and 50 of the Act clarify that capital gain can be correctly worked out only if cost of acquisition or improvement of the asset is deducted from the full value of consideration received. Therefore, to entitle the assessee to any deduction in terms of the said provisions on account of any improvement it is required that a claim for such deduction is made before the assessing authority failing which the A.O. shall be entitled to proceed on the assumption that no such improvement was actually made. In the present case the claim of the said improvement of the land was made before the A.O. though it was based on an estimate as per the MOU which fetched the appellant a much higher sum of money than it could have been without such improvement as envisaged in the memorandum and witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e should be a 'necessary' expenditure. Thus, in the computation of capital gains, in order to qualify for deduction under section 48, the expenditure should be "wholly" in terms of quantum in connection with transfer and the motive for such expenditure should also be the transfer of the capital asset in order that expenditure comes within the ambit of the word "exclusively". The allowability has to be examined from this angle. 4.10 In view of the above stated facts, the disallowance made by the Assessing Officer is liable to be deleted and the grounds of appeal no.2 and 3 raised by the appellant are allowed." 16. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us with the following grounds : "1. The learned Commissioner of Income-tax (Appeals) erred in allowing the assessee's claim of deduction of Rs. 10,79,22,051/ - in the computation of Short-term Capital gains arising on sale of land at Fursungi on account of expenses to be incurred as per an MOU towards development of property and in directing the Assessing Officer to reduce the sum from the sale consideration on account of refund. 2. The learned Commissioner of Income-tax (Appeals) erred in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not apply to the assessee's case." 17. The Ld. Departmental Representative strongly challenged the order of the CIT(A). He submitted that whatever documents were produced are post fact scenario. He submitted that the liability of the assessee to pay back does not arise out of the sale deed. The assessee is the owner of the money received. Further, the assessee is a family member of the director of the company. Referring to the copy of the assessment order the Ld. Departmental Representative submitted that the AO has thoroughly discussed the issue and rejected the claim of refund of the amount. When nothing is mentioned in the sale deed, no deduction or allowance can be granted while computing capital gain. There was also no such direction by the Ld. Addl.CIT u/s.144A. The Ld.CIT(A) has gone by the real income theory and allowed the claim made by the assessee which is not proper under the facts and circumstances of the instant case. He submitted that when there was no mention of the socalled MOU dated 16-08-2007 in the sale deed and since the MOU was neither registered nor notarised, therefore, it clearly indicates that the socalled MOU was an afterthought and a selfserving do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t when compared to the cost of land, the cost of development is almost as much as the cost of the land. Further, according to the AO the lands sold by the assessee to D.S. Kulkarni Developers Ltd. are scattered over large expanse of land and the development work and expenses according to the AO is illogical. Further, in the sale deed, there is no clause which states that the money will be refunded in the event of such development work not carried out by the assessee. Further, according to the AO, the entire scenario of purchase of lands by the assessee and the almost immediate sale within short span of time for huge sums shows that it is apparent that by purchasing the lands at Rs. 17,67,80,000/- D.S. Kularni Developers Ltd was enhancing the value of the land in its books and passing the consideration to interested parties, i.e. family members, relatives, members of sister concerns, directors etc. In view of the above and in view of the detailed reasoning given in the body of the assessment order, the AO disallowed the amount of Rs. 8,30,61,030/- being cost of selling. We find in appeal the Ld.CIT(A) allowed the claim of deduction of Rs. 8,30,66,636/-. 22. It is the case of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... During the F.Y.2007-08 we have sold lands at Mouje Fursungi to D.S. Kulkarni Developers Ltd. (Hereinafter referred to as DSKDL) and received consideration of Rs. 87,17,34,375/-, which was reflected on credit side under the head sales accounts. We had agreed to sell the developed land by carrying some development work in the lands which were sold/transferred/assigned to DSKDL. Therefore, after estimation for the expenses we have debited the liability provision of Rs. 54,82,24,680/- about which in the last hearing, you have asked for justification. For this purpose, the facts of the case are to be properly appreciated and which are stated hereunder - . . . . . . . . . . . . . . . ." 25. After considering the submission of the assessee, the MOU filed by the assessee was accepted by the AO and there is no addition/disallowance made in the body of the assessment order, a copy of which is placed at pages 349 to 359. Therefore, we find merit in the submission of the Ld. Counsel for the assesse that once similar transaction has been accepted in one case, the department cannot deviate from the same principle in other cases. 26. We find the Hon'ble Supreme Court in the case of Berger P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a departure. Therefore, on the principle of uniformity of approach which is required to be adopted by the Revenue in relation to similarly placed assessees as laid down by the Hon'ble Supreme Court, in our view, the action of the income-tax authorities in the present case to initiate proceeding u/s 147/148 to assess capital gains on the basis of the agreement dated 26.03.1999 with MTDC is not justified." Therefore, when the AO in the case of D.S. Kulkarni & Co. has also raised similar queries as raised by the present AO and after elaborately recording the various details submitted by the assessee in the order sheet, copies of which are placed at pages 329 to 343 of the paper book has accepted the MOU as genuine and no addition/disallowance was made on account of such development expenditure which was claimed by the assessee as cost of selling, therefore, we find no reason as to how and why the AO in the case of the present assessee held that the socalled MOU was an afterthough and self-created and self-serving document especially when the order passed in the case of D.S. Kulkarni & Co. is prior to the assessment order passed in the instant case and the same has not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of ACIT Vs. Shirish D. Kulkarni vide ITA No.709/PN/2012 has already discussed the issue and dismissed the appeal filed by the revenue by observing as under : "4. We have heard the parties and perused the record. The Ld. Counsel submits that the assessee had negotiated with the landlords at Village-Fursungi, Tal.-Haveli, Distt.-Pune for purchase of lands. The assessee purchased the agricultural land during the F.Y. 2007-08 at Village-Fursungi. The assessee argues that the assessee purchased the land admeasuring 234.5R and the cost of acquisition to the assessee was to extend of Rs. 3,36,23,900/-. The assessee also paid the brokerage of Rs. 1,50,000/- which details were submitted before the Assessing Officer. He submits that D.S. Kulkarni Developers Ltd., which is renowned builder and developer in Pune was desirous to purchase about 100 to 120 acres of contiguous lands for development of their SEZ project at Village-Fursungi, Tal.-Haveli, Distt.-Pune. The assessee approached D.S. Kulkarni Developers Ltd. and offered to assign the assessee's rights of the agricultural lands acquired in Village-Fursungi. The D.S. Kulkarni Developers Ltd. (in short "DSKDL") offered handsome consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. He argues that subsequently, the developer changed the project and made it Special Township Project. Due to change in the project, the assessee was instructed to hold the development work. He argues that the consideration fixed for the sale of the land was linked with the development expenditure which was the assessee's contractual liability and hence, the assessee was entitled to claim the same expenditure as a deduction. Ld. Counsel supported the order of the Ld. CIT(A). 7. Per contra, the Ld. DR vehemently argues that in the final sale deed between the assessee and the developer there is no whisper of the MOU between the assessee and DSKDL dated 26-09-2007. He argues that even presuming the assessee has incurred the expenditure to the extent of Rs. 1,62,33,447/- but so far as reducing an amount of Rs. 85,32,153/- from the sale consideration is not proper as admittedly the assessee has not incurred the said expenditure. He pleaded for restoring the order of the Assessing Officer. 8. On perusal of the assessment order, we find that the Assessing Officer has not discussed the issue in detail but adopted shortcut by disallowing the entire claim of expenditure by writing 5-6 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since the AO in the case of one of the sister concerns namely D.S. Kulkarni & Co. has accepted such MOU as genuine and no addition/disallowance has been made on account of such refund of expenses to D.S. Kulkarni Developers Ltd. and since D.S. Kulkarni Developers Ltd. has also reduced such expenditure from its work-inprogress and considering the fact that the Tribunal in the case of another related person of the assessee namely Shri Shirish D. Kulkarni has already dismissed the appeal filed by the revenue under identical facts and circumstances, therefore, we find no infirmity in the order of the CIT(A) in allowing the claim of deduction of Rs. 8,30,66,636/- in the computation of short term capital gains arising on sale of land on account of expenses to be incurred as per the MOU towards development of property. We accordingly uphold the same. The grounds raised by the revenue are accordingly dismissed." 20. Since the facts of the instant case are identical to the facts of the cases decided by the Tribunal cited (Supra) therefore, following the decision of the Coordinate Bench of the Tribunal in the case of other group members and in absence of any contrary material brought to ou ..... 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