9911796707
TMI Blog1998 (8) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... d (W) Bombay to Marathon Combine price 71,79,720 Less : Cost of plot purchased as per valuation report of Mr. Namavati Roshan attached 11,83,159 Legal fees payable : M/s Soloman & Co. 1,00,000 H.P. Ranina 6,750 Mr. Namavati 1,500 D.M. Harish 4,000 M.R. Deshpande 10,000 M.K.S. Chave 500 Other legal provision 35,000 1,57,750 Paid to compound wall 16,750 Demolition of office shatter & temporary office construction (as per statement) 47,775 Security salary & other expenses (as per statement) 60,000 14,65,434 Long-term capital gain 57,14,286" 3. The assessee entered into an agreement dated 26-6-1992 to sell all the development rights in respect of the above-mentioned plot to one M/s. Marathon Combines and to appreciate the issues raised in this appeal it is necessary to look into some of the terms of this agreement. In the agreement, the appellant is described as the owner and M/s. Marathon Combines as the developer. It is mentioned in the agreement that the owner has agreed to grant to the developer and the developer agreed to acquire from the owner development rights of the above-mentioned plot i.e., Plot No. 1087. The rest of the relevant clauses are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time as the essence in this respect by giving 15 days' notice in writing to the Developers on expiry of such 9 months and the balance of; iii. ₹ 11,32,500 (Rupees Eleven lacs thirty two thousand five hundred only) before delivery of charge of the said Property to the Developers or on or before 31st March, 1993 whichever is earlier. The owners shall be entitled to make time as the essence in this respect by giving 15 days' notice in writing to the Developers on expiry of such period. 7. Upon payment of the full consideration by the Developers to the owners as provided in this Agreement the owners shall grant a licence to the Developers to enter upon the said Property with rights: a. To put up and/or erect sign boards upon the said property as also issue advertisements including the advertisements in newspapers as may be deemed fit by the Developers in respect of the said property and the sale by the Developers of the premises thereon on ownership basis; b. To carry out and complete in the name and account of the Developers construction of building on the said property by themselves or through any building contractors, sub-contractors or agents; c. To dispose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. ** ** ** 18. ** ** ** 19. ** ** ** 20. Within 12 months of the completion of construction of new building on the said property as provided herein the developers shall form a Co-operative Housing Society of holding of premises therein and on completion of registration of such Co-operative Housing Society the owner shall executate a conveyance on the said property alongwith buildings thereon in favour of such Co-operative Housing Society and the developers shall join in the execution of the conveyance as confirming party thereto. All the costs charges and expenses of the formation and registration of such Co-operative Housing Society shall be borne and paid by the developers only and the owner shall not in any way be responsible or liable for the same." 4. The area of the plot i.e., plot No. 1087 is 1,672 sq. mtrs. The consideration of ₹ 1,13,25,000 was fixed on the basis that the estimated FSI available for construction of the premises on the said plot would be 1,672 sq. mtrs and the clause at 10 extracted hereinabove provided for reduction of the consideration in case the FSI available should be less than 1,672 sq. mtrs. Further, the agreement also provided th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onately in the respective years. The Assessing Officer held that the sale consideration should be taken at the figure of ₹ 1,13,25,000 stipulated in clause (1) of the agreement. He was of the view that there cannot be a transfer in stages or in different years and as per the above agreement, the entire plot No. 1087 of 1,672 sq. mtrs. had been transferred. He also mentioned that the assessee obtained the necessary 'No Objection Certificate' under section 269UL(3) of the I.T. Act from the Appropriate Authority and such a certificate is issued on the basis of the representation made before the Authority by the appellant that the entire plot was sought to be transferred. He was of the view that, if the assessee sought to transfer the plot in different stages, it was incumbent upon it to approach the Appropriate Authority repeatedly, i.e., at the time of each transfer. He was also of the view that the Bombay Municipal Corporation granted the FSI in stages and, therefore, there seemed to be no end to such gradualism. He also observed that the purchaser was given possession of the whole plot of land and the appellant had no authority to reduce the consideration on its own. He acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Garden area is 473.19 sq. mtrs. (for both these items FSI is not permitted to be consumed as per BMC rules) and hence net area for consumption available remains 2,606.14 sq. mtrs. and out of which on plot No. 1088, the consumed FSI (for Anupama & Anurag, existing buildings built in 1974) is 1,342.25 sq. mtrs., and hence net available FSI permitted by BMC to develop on plot No. 1087 remains only 1,253 sq. mtrs., for which developer has paid to Society on different dates as follows: 1. ₹ 11,32,500 30-06-1992 For FSI of 1,060 sq. mtrs. Rs. 13-11-1992 2. ₹ 6,02,825 24-09-1993 For FSI of 89 sq.mtrs. Rs. - Interest @ 15% per annum 3. Rs. 20-09-1994 For FSI of 104 sq. mtrs. Rs. Total FSI of 1,253 sq. mtrs. It has been provided under clause No. 10 of the agreement dated 26-6-1992, that "If the FSI available on sanction of the building Plan in respect of the property is less than 1,672 sq. mtrs., the consideration fixed as above shall proportionately reduce." Accordingly as per amended agreement by letter exchanged between Solicitors of Society and Developer i.e., dated 21-10-1992 and 29-10-1992, the consideration was reduced and only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital gains have to be levied in the year of the transfer, it is pleaded that the action of the Assessing Officer in bringing the entire amount to tax in one year is valid in law. 9. We are of the view that the assessee deserves to succeed. Firstly, the sale consideration cannot be taken at ₹ 1,13,25,000 for the simple reason that this amount was never received. The terms of the agreement make it very clear that this amount was only a hypothetical figure and as per clause 10 of the agreement it is evident that the assessee would be entitled only for a reduced consideration if the FSI obtained is less than 1,672 sq. mtrs. So clearly, the assessee cannot be taxed on an amount that was not received. 10. The next question is whether the entire capital gain has to be worked out in one year or it can be spread over to three years as returned by the appellant. As per clause 20 of the deed which we have extracted hereinabove, the appellant has to execute the conveyance in favour of another co-operative society after the completion of the construction and the Developers formed that society with the buyers of the flats being made members. So a view can be taken that till the conveyanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper book, it is made clear that the former have granted a licence to enter upon and charge of a portion admeasuring 1,060 sq. mtrs. The relevant portion of the letter dated 16-12-1993 addressed by the appellant to M/s. Marathon Combines which may be seen at pages 59 to 62 of the appellant's paper book reads as under: "Your two letters, both dated 24th September, 1993 as also your letter dated 2nd December, 1993 were considered at the Special General Body Meeting of our members held on 5th December, 1993, when your Shri Ramnikbhai Z. Shah was also present. At our aforesaid Special General Body Meeting, your offer for payment of ₹ 6,48,037 for utilisation of additional 89 square metres of FSI was accepted, and the Managing Committee has been authorised to finalise the terms in connection therewith. Accordingly after discussions in our Managing Committee, we confirm that we are prepared to grant you the right to utilise 89 square metres of additional FSI in carrying out construction on our plot admeasuring 1,060 square metres granted to your under the above agreement on the following terms and conditions: (1) You shall immediately pay to us consideration for right to utili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed that only a licence to enter and carry on construction was granted to the developer and the possession of the plot was not allowed. However, the question whether such granting of licence amounts to granting possession or even if it does not amount to granting possession, whether it, under specified circumstances, amounts to transfer in terms of section 2(47)(v) of the I.T. Act need not detain us here as the assessee himself had offered capital gains on the basis of the area in respect of which the developer was allowed the licence to enter and carry on construction and it appears to us that such an offer could have been made only on the implicit assumption that such licence was tantamount to granting of possession and that such licence coupled with the receipt of consideration was tantamount to a transfer in terms of section 2(47)(v) of the I.T. Act. The revenue is entitled to accept the position conceded or stated implicitly or explicitly by an assessee. It cannot, however, go further than the conceded position and levy tax on the basis of a position that is not only not conceded but specifically denied by an assessee. In the present case, the assessee has denied that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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