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TMI Blog2019 (10) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... the land is not a constant or fixed price. It may fluctuate depending upon various factors such as area of the land, location of the land, infrastructure facility available around the land, access to the public road, etc. The State Registration Department, after considering all these facts, fixed the value which is known as guideline value to guide the Sub- Registrar to determine the market value. The guideline value may not always reflect the market value. Sometimes, the guideline value may be less or it may be more depending upon the area and location of the property. When the assessee entered into a joint development agreement for transfer of part of the land to the partnership firm at a particular price, this cannot be said that the value determined for transfer of part of land or the entire land is a device to increase the profit of the assessee-firm. AO as well as the CIT(Appeals) found that the market value of the land was fixed at a very lower rate since the children of the owners of the land were partners in the assessee-firm. There may be a justification for making allegation like this when the children of the land owners alone are partners. In this case, apart from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Tribunal is unable to uphold the orders of the lower authorities. Accordingly, the orders of both the authorities below are set aside and the Assessing Officer is directed to allow deduction under Section 80-IB(10) of the Act as claimed.- Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... handrasekaran and Smt. Saraswathi Chandrasekaran and not even a single penny was retained by the partnership firm. According to the Ld. counsel, the observation of the Assessing Officer that Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran got more money than the market value of the land since their children are having 35% of shares in the partnership firm is not correct. According to the Ld. counsel, the children of Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran might have received profit in proportion to their shares as per partnership deed, that does not mean that the land owners shifted the profit on sale of land to the partnership firm so as to transfer the profit to the children of Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran. 4. Shri G. Baskar, the Ld.counsel for the assessee further submitted that the land owners' share of sale proceeds is a composite one, consisting of consideration for sale of undivided share of land as well as the built-up area. The consideration collected by the assessee-firm towards the cost of the land was passed on to the land owners, namely, Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran. Therefore, accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risk element is not correct. The very fact that the children of Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran also liable for the losses of the partnership firm shows that they are taking risk in the business. Referring to profit margin of the partnership firm, the Ld.counsel submitted that profit margin in any business, not only in civil construction, would depend upon various factors. In this case, according to the Ld. counsel, the time gap between the joint development agreement and the sale of flats was very long. Moreover, the land was situated in a strategic location. According to the Ld. counsel, the project was commenced when the real estate business was in boom. Therefore, the profit margin declared by the partnership firm is not an unusual one. 7. The Ld.counsel for the assessee further submitted that unless there is a material to suggest that the profit margin or the market value of the land was suppressed or shifted with a motive to reduce the profit and to avoid payment of tax, the Assessing Officer cannot doubt the transaction at all. In this case, according to the Ld. counsel, without any basic material, the Assessing Officer has simply presumed that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the land owners is nothing but sale consideration pertaining to the land. 9. Referring to the assessment order, more particularly para 6, the Ld. D.R. pointed out that the claim of the assessee that market value of the land as determined by the Registration authorities was paid to the land owners, therefore, the ordinary profit was transferred to the owners of the land, was found to be not correct. According to the Ld. D.R., in the case of housing project, the cost of land would normally be more than the guideline value. In this case, according to the Ld. D.R., the property was transferred at the rate of guideline value. According to the Ld. D.R., the profit on sale of land was also included as profit from housing project. Moreover, the exorbitant profit shown by the assessee for claiming deduction under Section 80-IB of the Act clearly suggests that there was a devise adopted by the partnership firm along with the owners of the land Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran so as to reduce the tax liability. Hence, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the order of the Assessing Officer. 10. We have considered the rival submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer or by the CIT(Appeals) in the books maintained in the regular course of business activity. The Assessing Officer found that the cost of the land which was said to be taken from Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran for joint development by the assessee-partnership firm was valued at guideline value. The market value was not paid to Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran. It is a well settled principle of law that market value of the land is not a constant or fixed price. It may fluctuate depending upon various factors such as area of the land, location of the land, infrastructure facility available around the land, access to the public road, etc. The State Registration Department, after considering all these facts, fixed the value which is known as guideline value to guide the Sub- Registrar to determine the market value. The guideline value may not always reflect the market value. Sometimes, the guideline value may be less or it may be more depending upon the area and location of the property. When the assessee entered into a joint development agreement for transfer of part of the land to the partnership firm at a particular p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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