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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 ..... n 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 disturbed by the CIT u/s.263 of the I.T. Act till now. As 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 our notice by the Ld. Departmental Representative against the order of the Tribunal, we find no infirmity in the order of the CIT(A) allowing the claim of cost of selling amounting - Decided against revenue - ITA No.1167/PN/2013 - - - Dated:- 15-1-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Appellant : Shri Nikhil Pathak For The Respondent : Smt. Sardar Singh Meena ORDER PER R.K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 08-01-2013 of the CIT(A)-II, Pune relating to Assessment Year 2009-10. 2. Facts of the case, in brief, are that the assessee is an individual and filed her return of income on 30-09-2009 declaring total income of ₹ 14,75,060/-. During the course of assessment proceedings the AO noted that assessee in her computation of income h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elow : Estimate of land Development Work in r/o. Shilpa Kulkarni S.No. Particulars Amount 1 Removing disposing of existing bunds old huts cow shades houses etc. 185000 Government Private measurement of land (Mojani) 111072.15 Removing of grass, shrubs, debris, disposing, carting away cleaning 1480962 Construction of retaining/compound wall 9316774.13 Construction of entire road network in concrete with tremix finish 55813510 Plumbing Development of works External Drainage Development Work 2407996 Water Development Work 24795865 Storm Water Development Works 2541512 Excavation, Refilling levell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany has asked the assessee to refund the amount of ₹ 10,79,82,051/- as the SEZ joint venture was cancelled and the company did not want to water money on the development work. The money has been refunded by the assessee only on 10-03- 2010. The conditions mentioned for the refund of money are extraneous to the sale agreement sand nowhere mentioned in the sale agreements. The obligation to undertake the massive development work, or to return the money was never enjoined on the assessee by the sale deeds. The sale deeds merely mention vaguely certain development work to be carried out within 12 months of the sale. (xi) The decision of Kerala High Court cited by the assessee cannot rescue of the assessee as the facts of this case are different from the facts of the case cited above, and not comparable. (xii) As per the scheme of taxation of capital gains as per the provisions of section 48 of the Income Tax Act, 1961, the capital gains has to be computed by deducting from the full value of consideration received or accruing as a result of the transfer of capital asset, the following amounts, namely : (a) Expenditure incurred wholly in connection with the transfer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... experts of DSKDL and accordingly the assessee and authorized personnel of DSKDL confirmed the same on 27-11-2008 by executing the deed of confirmation. Therefore, the amount of expenditure to be expended on the development work was fixed. Therefore, it is incorrect to say that the amount of expenditure was not quantified at all. It was submitted that both the parties had agreed that the period for execution of work will be 12 months. However, due to development of future events the said company informed the assessee from time to time not to proceed with the work since DSKDL was negotiating to form SPV with various other companies and requirement of development work was in process/was constantly changing. 7. The assessee further submitted that the period of 12 months was extended from time to time by both the parties mutually. After final decision of refunding the amount, DSKDL passed a journal entry in their books and cost of their WIP got reduced by the said amount. It was submitted that refund of money by the assessee will increase the taxation in the hands of DSKDL and therefore there is no revenue loss. On the contrary, if the said expenditure is disallowed, it will amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale consideration. 9. In the meantime the AO received the direction issued u/s.144A from the Addl.CIT who directed the AO to consider the following points before finalization of the order (para 5.1 and 5.2 of the Assessment order) : (a) Agreement to sale should be perused thoroughly and all the terms and conditions should be examined to ascertain the facts as narrated by the assessee. (b) MOU between assessee and DSKDL should be examined vis- vis terms and conditions mentioned therein. (c) A.O. should ascertain what is the position in the case of DSK Co. for A.Y. 2008-09, whether facts of that case are same as in this case and what was the decision arrived at in that case during the course of assessment. (d) A.O. should ascertain assessee s contention that addition would lead to double taxation as assessee has returned the money to DSKDL. Assessee says that DSKDL has already credited the amount in its books and WIP has been reduced accordingly. A.O is directed to examine assessee s contention and also verify the facts vis- -vis return of income filed by DSKSL in Range-1, Pune. (e) Case laws cited by assessee should be dealt with and examined before finalization o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O. The assessee filed a detailed submission and a paper book which contained the documents and related details which were filed before the AO during the assessment proceedings. It was contended that a detailed submission for the objections raised by the AO along with the purchase/sale deeds, bank statement and estimates prepared by the assessee and technical experts for development of land, JV passed by DSKDL, proof of refund of money was submitted during the assessment proceedings. The assessee had also met the objections raised by the AO during the assessment proceedings and which had also been filed during the 144A proceedings before the Additional CIT, Range-3. 13. As regards the non-completion of work within 12 months as per the terms of the sale deed is concerned it was explained that due to the changed scenario after the inclusion of a foreign partner GTC with respect to the planning of SEZ, the developer DSKDL went on instructing the assessee not to commence the development work. With respect to the non-mention of the development cost to be borne by the assessee in the sale deed it was explained that the nature of work to be carried out was specifically mentioned in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount by legal means which defies intention of an afterthought. Regarding the observation of the Assessing Officer that refund of money is a colourable device to reduce tax liability and also with respect to the delay in refunding the money by the assessee to DSKDL it was submitted that DSKDL gave letter dated 30-09-2009 to the assessee seeking refund of amount and the assessee had given its acceptance wherein she agreed to refund the money within 8 to 10 months. The assessee explained that the said letter was given as per the MOU and Deed of confirmation and contended that both has to be referred together and one cannot read one document in isolation and come to a conclusion. The assessee again reiterated that after the final decision of refunding the amount DSKDL passed JV in their books and cost of their WIP got reduced by the said amount. It was contended that the refund of money will increase the taxation in the hands of DSKDL, therefore, there is no revenue loss and on the contrary if the said expenditure is disallowed it will result in double taxation, both in the hands and the assessee as well as DSKDL. Therefore, the fact clearly indicates that it is neither a colourabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of land in favor of DSK Developer Ltd for a consideration of ₹ 22,36,57,525/-. The appellant in performance to the MOU's and the condition of development of land approached the person having technical knowledge and prepared an estimate of expenditure for the development of the land at ₹ 7,98,57,979/- and the same had also been confirmed by both the parties including the appellant for which a deed of confirmation dated 15-01-2009 was executed which confined and quantified the expenditure The project of SEZ envisaged by developers M/s D.S. Kulkarni Developer Ltd had also been approved by the govt. vide its approval dated 26-7-2007. The facts brought on record do indicate that the development work got delayed because of the negotiation by the developer with the foreign Co. GTC Cyprus, Netherland. Though, subsequently the developers had to abandon the project SEZ because of the worsening economic scenario and the negotiations having broken down with the foreign company. It was under these circumstances that the developers sought refund of the amount which was to be incurred towards development work. The various objections raised by the Assessing Officer during the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire facts and the totality of the circumstances to be taken into account before arriving at a conclusion. The Assessing Officer has not been able to prove or bring on record any such material which could indicate the transaction to be sham rather has drawn inferences without having examined the same. 4.7. Under the Income tax Act, real income is charged to tax and not notional income. The courts have used this concept for ensuring that what is taxed is as nearly real as possible within the constraints of statutory limitation. The income is one which gives the owner disposable capacity. Probability or improbability of realization in a realistic manner cannot be ignored what is taxable should be real and not hypothetical. The concept of real income also came for critical analysis in the case of State Bank of Travancore Vs. CIT (1986) 158 ITR 102 (SC) wherein it is held that, it is the income which has really accrued or arisen to the assessee that is taxable and in the present case no such income has accrued or arisen so as to be treated as income. 4.7.1 The apex court in the case of Godhra Electricity Co. Vs. CIT 225 ITR 74 (SC) has elaborated and held that : Income tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nged the amount awarded with respect to the expenditure incurred on subsequent litigation by the appellant, the Hon ble Court held that all expenditure wholly and exclusively incurred in connection with such litigation is an expenditure within the meaning of section 48 and for the purpose of the section, it is immaterial that the expenditure was incurred subsequent to the award so long as it was incurred wholly and exclusively in connection with the compulsory acquisition. In the present case also the expenditure incurred by the appellant is with reference to and is in connection with wholly and exclusively related to the transfer of the land. 4.8.2 In the case of Dr. P. Rajendran, cited supra, the Kerala High Court held that the words in connection with used in clause (i) of section 48 of the I.T. Act, are very wide in their ambit and hence there is no warrant for importing a distinction that to qualify for deduction the expenditure must necessarily have been incurred prior to the passing of title. It was further held that the crucial test to be applied is whether the expenditure was incurred wholly and exclusively in connection with transfer and it is immaterial whether it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and it certainly had to be added to the cost of the asset which the A.O. has failed to consider at the assessment stage. The sale of the capital asset and the development work to be carried out as per the contents of the MOU dated 16-08- 2007 has not been disputed by the A.O. The expression in connection with such transfer is wider than the expression for the transfer . Any amount, the payment of which is absolutely necessary to effect the transfer will be an expenditure covered by this clause. In other words, if, without improving any encumbrance, sale or transfer could not be effected, the amount paid for removing that encumbrance will fall under clause (i) In the case of CIT Vs. Shakuntala Kantilal (1991) 190 ITR 56 (Bom) and followed in CIT Vs. Abram Alvi (2001) 247 ITR 312 (Bom) SLP dismissed and CIT Vs. Piroja C. patel (2000) 242 ITR 582 (Bom) it has been held that the phrase in connection with should be liberally construed and that, in a case of an acquisition of land the expenditure incurred for prosecuting a reference to the court expenditure incurred by assessee on maintenance of staff etc., pending finalization compensation will be deductible expenditure since capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not even a mention of the so-called Memorandum of Understanding (MOU) dt. 16-08-2007, which was neither registered nor notarized, in the Sale Deeds which were executed subsequently. This clearly indicates that the so-called MOU was an after-thought and a self-created, self-serving document. 3. The Learned Commissioner of Income-tax (Appeals) erred in failing to appreciate that the total expenses of ₹ 10,79,22,051/- was a mere estimate which had neither been quantified in the Sale-Deed or in the MOU and, in the circumstances, the same could not be treated as expenditure incurred only and exclusively in connection with the transfer of assets u / s. 48( 1) of the Income-tax Act, 1961. 4. The Learned Commissioner of Income-tax (Appeals) erred in allowing the assessee's claim of deduction of ₹ 10,79,22,051/- even though the assessee had not furnished any evidence either before the Assessing Officer or in the course of the appellate proceedings in support of the expenses actually incurred. 5. Without prejudice to the above, the learned Commissioner of Income-tax (Appeals) erred in failing to appreciate that the expenditure of ₹ 10,79,22,051/- claimed to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther, within a short span of time the assessee could not have spent a huge sum of ₹ 10.80 crores. Therefore, without appreciating the facts of the case properly the Ld.CIT(A) has allowed the claim of the assessee which is not proper under the facts and circumstances of the case. He accordingly submitted that the order of the CIT(A) be reversed and that of the AO be restored. 18. The Ld. Counsel for the assessee on the other hand while supporting the order of the Ld.CIT(A) submitted that identical issue had come up before the Tribunal in the case of other members of the group and the Tribunal vide ITA No.1163 to 1166/PN/2013 order dated 12-10-2015 has decided the issue and dismissed the grounds raised by the Revenue, therefore, this being a covered matter the grounds raised by the Revenue should be dismissed. 19. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We find the AO in the instant case denied the deduction of cost of selling amounting to ₹ 10,79,82,061/- on the ground that in the agreement to sale with DSKDL there is no mention of this cost to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is the case of the revenue that since there was no mention of the socalled MOU dated 27-12-2007 in the sale deed which was executed subsequently and since the MOU was neither registered nor notarized, therefore, the MOU is nothing but an afterthought and selfcreated and self-serving document. Further, it is also the case of the revenue that the total expenses of ₹ 8,30,66,636/- was a mere estimate which had neither been quantified in the sale deed nor in the MOU and therefore the same could not be treated as expenditure incurred wholly and exclusively in connection with the transfer of assets u/s.48(1) of the I.T. Act. 23. It is the case of the Ld. Counsel for the assessee that when similar MOU has been accepted by the department in the case of the sister concern of the assessee namely D.S. Kulkarni and Co. for A.Y. 2008-09, the department cannot say that the MOU entered into between the assessee and D.S.Kulkarni Developers Ltd. is a selfserving document. Further, M/s. D.S. Kulkarni Developers Ltd. has already reduced such expenditure from the work-in-progress. It is also the case of the Ld. Counsel for the assessee that under identical facts and circumstances the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the Hon ble Supreme Court in the case of Berger Paints India Ltd. vs. CIT reported in [2004] 266 ITR 99 (SC) has observed as under : . . . . . . . . . . . . . . . . . . . . . . . . . . . . In view of the judgments of this Court in Union of India v. Kaumudini Narayan Dalal [2001] 249 ITR 219, CIT v. Narendra Doshi [2002] 254 ITR 606 and CIT v. Shivsagar Estate [2002] 257 ITR 59, the principle established is that if the revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one assessee, then it is not open to the revenue to challenge its correctness in the case of other assessees, without just cause. 27. We find the Pune Bench of the Tribunal in the case of Shri Vipul Krishna Ashtekar vide ITA No.1062/PN/2013 order dated 30- 12-2014 for A.Y. 2009-10 and other connected appeals at para 15 of the order has observed as under : 15. In the aforesaid background, the ratio of the law enunciated by the Hon'ble Supreme Court in the cases of (i) Union of India vs. Kaumudini Narayan Dalal, (2001) 249 ITR 219 (SC); (ii) CIT vs. Narendra Doshi, (2002) 254 ITR 606 (SC); and, (iii) CIT vs. Shivsagar Estate, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order passed in the instant case and the same has not been disturbed by the CIT u/s.263 of the I.T. Act till now. 28. Further, the allegation of the revenue that D.S. Kulkarni 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 and directors etc. is also not correct since D.S. Kulkarni Developers Ltd. by passing a journal entry has reduced such development expenses from the work-in-progress. The journal voucher passed by DSKDL on 30-09-2009 is placed at paper book page 259 according to which the Development expenses has been reduced to the extent of ₹ 8,30,61,030/-. It is also a fact that the assessee has refunded the amount of ₹ 8,30,61,030/- to M/s. D.S. Kulkarni Developers Ltd. and the same has been credited in their bank account. The Hon ble Bombay High Court in the case of Sushila Shantilal Jhaveri (Supra)has held that subsequent events or developments occurring pendent lite can be considered if they have the effect of overshadowing the original case found by the court below. The relevant observations of the Hon ble Court read as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The D.S. Kulkarni Developers Ltd. (in short DSKDL ) offered handsome consideration for sale of lands provided the assessee undertakes the work of basic development of the property as the lands were used for agricultural purposes and were not suitable for SEZ project. He submits that as per understanding between the assessee and developer, the said DSKDL was interested in purchasing the developed land subject to 1) Removing disposing bunds, old huts, cow sheds and houses. 2) Removing grass, shrubs, debris, disposing carting away and cleaning. 3) Government private measurement of land (Mojani) 4) Construction of entire road network. 5) Construction of retaining/compound wall 6) Plumbing development works. 7) External drainage development work, storm water development work etc. 5. After deal was finalized there was a MOU between the assessee and DSKDL dated 26-09-2007 and it was the contractual obligation of the assessee to complete the entire development work mentioned here-in-above. He submits that for doing all these works and after development the assessee was offered the good purchase price for the land. He submits that subsequently the assessee e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed the issue in detail but adopted shortcut by disallowing the entire claim of expenditure by writing 5-6 lines. We find that the Ld. CIT(A) has in detail dealt with the issue and also narrated the relevant facts. In this case nowhere it is disputed that the assessee has sold the lands to the DSKDL but the solitary controversy is in respect of contractual liability on the assessee for carrying out development works on the said land as those lands were agricultural land, whereby the said land would be compatible for the project of the DSKDL which was initially SEZ project. It is stated that subsequently the DSKDL decided not to go with the SEZ project but decided to go with the Special Township Project and hence, the assessee was requested to withhold the further development. The assessee has produced the details of the expenditure on the said land before the Ld. CIT(A) to the extent of ₹ 1,62,33,447/- which has not been controverted before us only argument of the Revenue is that the said expenditure is incurred by the assessee not during the assessment year. 9. We find that the identical issue has come for the consideration before the ITAT, Mumbai in the case of Kalpatar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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