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TMI Blog2020 (12) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, carrying right to premises, had entered into an agreement with the third party buyers for transfer of equity shares as a result of which occupancy rights in the units in Lodha Supremus was transferred. During the FY 2010-11, the SNCML has recorded a sales consideration of ₹ 32,81,74,835/-. Thus in absence of transfer of units in Lodha Supremus , neither a sale can be recorded in the books of the assessee nor any income can be said to have arises in the hands of the assessee and consequently no income can be brought to tax in the hands of the assessee - Decided in favour of assessee. Addition on account 8% profit - AO taxing presumptively at 8% of the cost of construction of the project Lodha Supremus , treating the assessee as a contractor for the said project - HELD THAT:- There is nothing on record that the assessee acted as a work contractor on behalf of SNCML to construct the building. The contribution agreement referred to by the AO is nothing but assigning the supervision of the construction to the assessee by SNCML as per section 10 of MOFA. The said agreement unlike that of any work contract, does not assign any contractual profit or commission to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in appreciating the fact that the assessee is engaged in the business of land development and construction and has constructed and sold commercial premises during the year under consideration. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in appreciating the fact that the assessee shows in the Balance Sheet, the construction expenditure incurred as the Capital Work in Progress. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in appreciating the fact that the assessee cannot escape from offering its profits for taxation merely if it shows the said activity by different nomenclature in the books. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in appreciating the fact that the assessee company had made major changes in the Articles of Association by attaching the space in building to be sold to the shares of the company, the action on the part of the assessee company is ultra-virus of the Company's Act, 1956. 5. On the facts and in the circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upremus on the land owned by SNCML for which cost shall be borne by SNCML by way of shareholders contribution. The amended Articles of Association of the assessee inter alia provided for granting right to use and occupy the units in the project to its shareholders. It was also agreed that SNCML would sell the shares of the assessee which would entitle the buyer of the shares to possess and occupy the designated constructed area. The sale proceeds of shares of the assessee shall be accounted as business receipts by SNCML. In view of the above arrangement, the assessee-company was left with no right to occupy or sale or lease or deal in any manner with the units of Lodha Supremus as their rights were attached to the shares of the assessee-company and total shareholding of the assessee was with SNCML. Hence, SNCML being holder of the shares of the assessee, carrying right to premises, had entered into an agreement with the third party buyers for transfer of equity shares of KHL as a result of which rights in the units in Lodha Supremus stood transferred. During the financial year (FY) 2010-11, the SNCML has recorded a sales consideration of ₹ 32,81,74,835/- and resulta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t : It is clear that the assessment year 2012-13 in the case of SNCML was covered in the proceeding before the ITSC. The ITSC has already taxed the revenue from the project Lodha Supremus in the hand of SNCML as evident from the discussion in above paragraph. Thus, I am of the considered view that taxing the same income again in the hand of the Appellant will result into double taxation of the same income which is not permissible in view of the settled principle. I also find force in the submission of the AR that the Appellant was used as a SPV by SNCML for construction of Lodha Supremus which is more like a co-operative society carrying out the work for and on behalf of its members out of the cost met by them. Therefore, the transactions entered into between the SNCML and Appellant are not sham transaction as alleged by the AO. Under such circumstances no profit could arise in the hand of SPV. Thus, I am of the view that the addition of profit made in the hand of the Appellant is unjustified; therefore, the addition made by the AO is deleted. 5. Before us, the Ld. Departmental Representative (DR) submits that the assessee was constructing the building as a Contractor/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icably linked to its shares/shareholders. It was also agreed that SNCML would sell the shares of the assessee which would entitle the buyer of the shares to possess and occupy the designated constructed area. The sale proceeds of shares of the assessee shall be accounted as business receipts by the SNCML. In view of the above arrangement, the assessee-company was left with no right to occupy or sale or lease or deal in any manner with the units of Lodha Supremus as their rights were attached to the shares of the assessee-company and total shareholding of the assessee was with SNCML. Hence, SNCML being holder of the shares of the assessee, carrying right to premises, had entered into an agreement with the third party buyers for transfer of equity shares as a result of which occupancy rights in the units in Lodha Supremus was transferred. During the FY 2010-11, the SNCML has recorded a sales consideration of ₹ 32,81,74,835/-. Thus in absence of transfer of units in Lodha Supremus , neither a sale can be recorded in the books of the assessee nor any income can be said to have arises in the hands of the assessee and consequently no income can be brought to tax in the hands o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the project Lodha Supremus , treating the assessee as a contractor for the said project. The Ld. CIT(A) allowed the appeal filed by the assessee on the following reasons : The AR has drawn my attention to paras 5, 6 and 7 of the written submissions dated 8.5.2017 and submits that as upheld by the CIT(A) for AY 2012-13, the appellant was precluded from earning any profit from the said project, whether from sale of units or by any other manner including an alleged contractual income. There was no such agreement between the appellant, SNCML and the members (shareholders) who were allotted the units that the appellant will act as a contractor and shall be allowed any income in that capacity. I therefore allow this ground No. 12. 9. Before us, the Ld. DR supports the order passed by the AO. On the other hand, the Ld. counsel for the assessee relies on the order passed by the Ld. CIT(A). 10. We have heard the rival submissions and perused the relevant materials on record. In the instant case the AO presumed that the assessee acted as a contractor and estimated profit @ 8% of cost. There is nothing on record that the assessee acted as a work contractor on behalf of SNCM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order passed by the Ld. CIT(A). 14. We have heard the rival submissions and perused the relevant materials on record. In the instant case, the entire project land was owned by SNCML and it was merely the godown right which was assigned to the assessee company. Further, even the cost of such godown right was assumed by SNCML in its estimated construction cost of project which is mentioned in para 4.1 of the Agreement for Contribution towards Construction Cost dated 31.03.2011. Thus the assessee was merely holding the godown right as an investment in its books of accounts, the cost of such right was in fact forming part of the project cost (Inventory) in the books of SNCML since the project Lodha Supremus was owned and developed by SNCML. As per the accounts, the godown right of ₹ 3,25,00,000/- was held as investment in the books of the assessee as on 31.03.2011 ; in the audited financials of FY 2011-12, the said investment in godown right was included within capital work-in-progress shown under the Schedule fixed assets . The application of section 45(2) is attracted only when there is a conversion of fixed assets into stock-in-trade which is not the case under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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