9911796707
TMI Blog2017 (5) TMI 1599X X X X Extracts X X X X X X X X Extracts X X X X ..... is correct. The issue is also required to be answered in favour of the assessee against the department. - D.B. Income Tax Appeal No. 24/2013, 28/2013 - - - Dated:- 19-5-2017 - Mr. K.S. Jhaveri And Mr. Inderjeet Singh JJ. For the Appellant(s) : Mr. Anil Mehta with Mr. Sameer Sharma For the Respondent(s) : Mr. Sanjay Jhanwar with Mr. Prakhul Khurana Ms. Archana JUDGMENT In both these appeals common questions of law and facts are involved, hence, they are decided by this common judgment. 1. By way of these appeals, the department has assailed the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeals of the department and partly allowed the appeals of the assessee. 2. This Court while admitting the appeals framed the following substantial questions of law:- 1. Whether the Tribunal was justified in holding that the Assessing Officer as well as CIT(A) have erred in rejecting the books of accounts of the assessee under Section 145(3) of the Act and thereby reversing the findings given by Assessing Officer as well as CIT(A), ignoring the undisputed facts that the assessee has failed to maintain quantitative and qualitative stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e month of Dec. 2006.The assessee firm applied to JDA for change of land i.e. conversion. After change of land use on 28th May, 2007, single patta was issued to the assessee firm by JDA on 59 14-06-2007. He submitted that the firm acquired second parcel of land admeasuring 17.889 acres during the month of Nov. 2007 to Jan. Feb/2008. The assessee conceivd a Mega Housing Project on the above residential plot of land and started marketing and selling the same. The construction of residential units under project commenced in the month of Sept. 2007. Since the size of the project was quite laree, the assessee decided to avail of the marketing and selling services of Asipac and appointed it vide service agreement dated 24-08-2007. Since it was necessary to infuse more funding into the project, it was advised by the consultant Asipac to obtain substantial loans/ funds or outsource the development and marketing of the project and go for private equity funding. The assessee decided second option to outsource the development as well as marketing of the project. Therefore, the assessee on 8-02-2008 entered into 06 agreements as part of arrangements of funds through FDI / private equity fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supplemental Agreement was entered into on 11-6- 2008 whereby Warburg Pincus Group restricted its investment to ₹ 22.54 crores only which was already paid and option was also given to go ahead with the project in case notification is withdrawn and other acquisition conditions are satisfied. Consequently, the 61 payment of security deposit was also confined to initial amount paid at the time of first closing only and no contract took place between the parties in respect of second trenche land. The ld. AR submitted that on 29-09-208, the Govt.of Rajasthan issued a notification releasing the project land from acquisition. However, Warburg Pincus Group did not exercise its option and the project got confined to first trenche land measuring 11.958 acres. He submitted that security to be paid by the assessee of ₹ 105.85 crores aginst the entire project got restricted to ₹ 41.94 crores out of which assessee received only ₹ 39.55 crores as security deposit. The ld. AR submitted that the AO did not take into account this Supplemental Agreement dated 11-06-2008 considering it as a bogus document as it was neither registered nor notorized and therefore, considered th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny need for such a clause for giving option to the developer to buy the land. The ld. AR referred to clause 5.3 of the development agreement and submitted that transfer of project land could take place in favour of developer as contemplated vide clause 5 and will occur through a deed of conveyance and the same shall be executed on proper value of stamp paper and will be registered with the office of Sub- Registrar. He submitted that as per clause 5.4 of the agreement if the owner i.e. assessee refuses to execute and / or cause registration of the deed of conveyance or sale deed in favour of the developer in accordance with clause 5 of the agreement , the developer shall without prejudice to its other rights and remedies shall have the right to seek specific performance against the owner to cause sale deed to be executed and to register in favour of the developer. He submitted that as per clause 12.3 of the developer agreement in the event of breach of the terms and conditions of the agreement by the assessee, at the sole discretion of the developer, the developer shall sell or shall cause to sell the project land to a third party at the prevailing market price and for considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration of the units because assessee's interest is duly secured by virtue of clauses 7.1.1, 7.1.2 and 7.2 of the development agreement which provides that assessee will be provided the fixed amount of ₹ 105.85 crores out of receivable on sale of residential units. The ld. AR submitted that the AO himself was confused as he also made an attempt to apply provision of Section 28(va) of the Act which has no application as Section 28(va) applies only in cases where lumpsum consideration is paid by a party to another to abstain from carrying out a business activity similar to the business carried on by the first party. He submitted that it normally happens when a business is sold and the buyer in order to secure the commercial cause asks the sellers not to compete or carry on similar business within the vicinity. The ld. AR submitted that the cases cited by the ld. DR are not applicable to the facts of the case as the land has not been sold under the development agreement. Therefore, even the addition of ₹ 29.95 crores confirmed by the ld. CIT(A) by deleting the balance amount of ₹ 52.74 crores out of total addition of ₹ 82.69 crores made by the AO is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lemental Agreement dated 11-06-2008 as genuine and thereby treated the consideration for land payable by UAHPL to the assessee at ₹ 41,94,75,000/-. We observe that ld. CIT(A) after considering the Supplemental Agreement dated 11-06- 2008 has taken sale consideration in respect of first parcel of land in para 14.3 of the impugned order and after deducting the cost as per assessee record of ₹ 11.99 crores has considered profit at ₹ 29.95 crores . Hence this Supplementary Agreement dated 11-06- 2008 could not be ignored and is a genuine document on the peculiar facts of the case. Therefore, the Department as well as assessee have filed appeal against impugned order of ld. CIT(A). 31.2 On perusal of the relevant clauses of the development agreement, though the fixed amount as security is receivable / received by the assessee as owner of the land but we are of the considered view that under the agreement transfer of land has not taken place nor security deposit received by the assessee could be considered as sale proceeds. The said agreement according to us cannot be considered as an agreement to sell in view of the specific provision of Stamp Act. It is not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not consider it necessary to discuss superficially in view of our our findings. 31.5 In view of the above, we are of the considered view that said security deposit received by the assessee cannot be considered as sale consideration for transfer of land in the assessment year under consideration. Hence, we not only confirm the order of the ld. CIT(A) in deleting the sum of ₹ 52.74 crores by disallowing ground no. 3 of the appeal taken by the Department but also delete the balance addition of ₹ 29.95 crores sustained by ld. CIT(A) by allowing the Ground No. 4 of the appeal taken by the assessee. Accordingly, the Ground No. 3 of the appeal of the Department is rejected and Ground No. 4 of the appeal of the assessee is allowed. 8. Counsel for the respondent contended that the contradictory stand is taken in earlier three issues and in view of the observations made by the Tribunal, the issue is required to be answered in favour of the assessee. 9. We are in complete agreement that under the Development Agreement rights will not be transferred and on specific question which has been put to counsel for the department that the transfer will not be made to sign ..... X X X X Extracts X X X X X X X X Extracts X X X X
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