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TMI Blog2019 (11) TMI 630X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the issue and have merely harped upon the accounting treatment given by the assessee at the time of purchase of the development right, we are inclined to restore the issue to the file of the Assessing Officer for denovo adjudication after due opportunity of being heard to the assessee. Since, the applicability of section 50C and claim of indexation on cost of improvement is dependent upon the ultimate outcome of the nature and character of the income received by the assessee, whether business income or capital gain, we also restore these issues to the AO for denovo adjudication depending upon his decision on the nature and character of the income received from sale of development right. Consequently, grounds raised are allowed for statistical purposes. - ITA no.5869/Mum./2017 - - - Dated:- 19-8-2019 - Shri Saktijit Dey, Judicial Member And Shri Manoj Kumar Aggarwal, Accountant Member For the Assessee : Shri Reepal Tralshawala For the Revenue : Shri Neil Phillip ORDER PER SAKTIJIT DEY. J.M. Captioned appeal by the assessee arises out of order dated 9th June 2017, passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e project through his Proprietorship concern M/s. Mohini Engineering and Contractors. For the assessment year under dispute, the assessee filed his return of income on 23rd September 2012, declaring total income of ₹ 40,34,360. In the course of assessment proceedings, the Assessing Officer on verifying the material on record found that the assessee had purchased development rights of a project from N.N. Construction, vide development agreement dated 4th May 2007, for a sum of ₹ 25 lakh. The said development rights were sold by the assessee during the year to M/s. Crystal Buildtech, through Memorandum of Understanding (MOU) dated 29th November 2011. On sale of such development rights, the assessee received an amount of ₹ 2,28,45,628. However, the assessee has treated the aforesaid receipt as income from business and credited to the Profit Loss account. Further, against such income, the assessee has also debited certain expenditure to the Profit Loss account. On verifying the agreement, the Assessing Officer found that the stamp duty value of the property as per the agreement is fixed at ₹ 3,22,08,000.In view of the aforesaid facts, the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure in case of this particular project was directly taken to the Balance Sheet instead of routing it through the Profit Loss account. Learned Commissioner (Appeals) observed, what the assessee acquired in the year 2007 and transferred in the year 2011 is the development rights of the particular project. Any expenditure in respect of such development rights will only be in the nature of cost of improvement. In this context, he referred to Para (viii) of the Development Agreement dated 4th May 2007, wherein the owner of the land while granting development right had allowed the assessee to execute conveyance deed in favour of the Co operative Housing Society to be formed by the Purchasers of the premises of the building to be constructed. He observed, had the assessee executed the conveyance deed in favour of the Co operative Society after getting the building constructed by himself, the proceeds could have been assessed as business income, which is not the case. He observed, assessee had simply acquired and sold development right and in the process has made substantial gain. He observed, whatever expenditure incurred by the assessee between the date of acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the assessee is a developer and is developing many other projects the learned Authorised Representative drew our attention to various other materials on record. The learned Authorised Representative submitted, while acquiring the development rights in the year 2007, the intention of the assessee was to develop the project and not to keep it as investment. Therefore, merely because at the time of purchase it was not shown as stock in trade in the balance sheet, it cannot be inferred that the assessee acquired it as investment. To support such contention, the learned Authorised Representative relied upon the decision of the Tribunal in DCIT v/s Rajesh Builders, ITA no.3980/Mum./2009, dated 13th October 2010. Thus, he submitted, the income received from sale of the development right should be treated as income from business. As regards applicability of section 50C of the Act, the learned Authorised Representative submitted, irrespective of the fact whether assessee requests for referring the valuation of the property to the DVO, the Assessing Officer is duty bound to refer the valuation of the property to the DVO in terms of section 50C(2) of the Act, in case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 1555.1 sq.mtrs. at Malavani, Malad (West), Mumbai. As per the terms of the development agreement, the assessee acquired the development rights of developing the building and further, right, title and interest to sell the newly constructed units to the intending purchasers. Thus, from the terms of the agreement, it is clear that the owner of the land had not sold the land to the assessee but has transferred the development rights to develop the property and sell the individual units. From the MoU dated 8th May 2011 between the assessee and Crystal Buildtech, it appears, the assessee has transferred all the rights and interest to the sub developer towards development of the building. Only condition imposed in the MoU is, the assessee has to complete the following works: a) To complete the on going work of foundation, piling and laying work up to the plinth level; b) Shifting and dumping of all the debris present at the site; and c) Leveling the entire land and fencing the boundaries with brick wall and gate. 9. Subsequently, the assessee has entered into another agreement with Crystal Build ..... X X X X Extracts X X X X X X X X Extracts X X X X
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