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TMI Blog2024 (4) TMI 988X X X X Extracts X X X X X X X X Extracts X X X X ..... ies, it should have summoned the developer to confirm the same. It does not appear that the Revenue had summoned the developer or tried to find the veracity of the letter. We should also note that admittedly the letter is signed by the developer. The genuineness of the letter is also confirmed by the fact that a substantial amount has also been paid to assessee . As per the letter, the developer committed to assessee that if in future the developer was able to obtain additional TDR and load it on the property being developed, an extra compensation at Rs. 1000/- per sq. ft. of the TDR utilised for additional construction of floors will be paid to assessee. In our view, the development agreement dated 29th September 1992 and the commitment le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the son of assessee under Section 260A of the Income Tax Act, 1961 (the Act) impugning an order dated 20th September 2002 passed by the Income Tax Appellate Tribunal, Mumbai Bench (ITAT). 2. The appeal was admitted on 13th June 2006 and two substantial questions of law were framed. By an order dated 23rd February 2024, an additional substantial question of law was framed. The three substantial questions of law are as under : 1. Whether the Tribunal was justified in interpreting the development agreement dated 29.9.1992 holding that after receipt of consideration the appellant ceased to be the owner of the property? 2. Without prejudice to above, if the receipt of Rs. 1,00,92,750/- is treated as compensation received for settlement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Rights (TDR) to be utilised for additional construction on the said property of assessee. During the course of development, the developer obtained TDR and paid an extra sum of Rs. 1,00,92,750/- to assessee which was offered by assessee as LTCG in Assessment Year 1997-1998. Assessee deducted professional fees of Rs. 75,000/- and offered net LTCG of Rs. 1,00,17,750/-. The Assessing Officer did not accept assessee s declaration of LTCG on this amount of Rs. 1,00,17,750/- despite assessee responding to the show cause notice and explaining assessee s case. The main objection that the Assessing Officer had was that this additional TDR was not mentioned in the said agreement and according to the Assessing Officer, the said property was already t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me is assessed either as STCG or income from other sources. The reason for CIT(A) to say that the amount will attract STCG is that the payment depended on a contingency of the developer acquiring the TDR and deciding to mount the same on the said property. The Government of Maharashtra permitted transfer of TDR in the year 1991 by which if a person owning a property had some extra FSI which was not utilised, that FSI can be sold to the persons who wanted to utilise that FSI in stipulated geographical areas. In view of this, the developer decided to purchase the TDR from the open market and utilised the same on the property of appellant just few months before the amount was paid. If the developer had not purchased the TDR and not decided to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e property. There is no exact reason given by the ITAT but according to the ITAT, this amount could have been paid to avoid hazards of litigation and to nullify the nuisance value. The payment was casual in nature not related to any specific asset. In the impugned order, the ITAT states However, a natural question arises under such circumstances that why the company has paid the substantial amount to a person who had no right over the property. To answer this question one has to keep in mind the other over all circumstances such as delay in construction of flats on account of some misunderstanding and long drown discussions leading towards hazards of litigation or encouraging nuisance value. Such circumstances also leads to a conclusion tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e commitment letter also dated 29th September 1992 should be read as one agreement. The amount of Rs. 1,00,92,750/- paid should be considered as payment under the development agreement itself. 8. Let us assume on the plot of land, when the agreement was entered into on 29th September 1992, the developer could have utilised its potential to build six floors. By the commitment letter issued separately by the developer, he has committed to assessee that if he is able to buy TDR and load it and thereby build additional four floors in the building, he would pay Rs. 1000/- per sq. ft. of the TDR being loaded. This was because on the date of the agreement this was uncertain. The developer was able to acquire TDR rights of 500 sq. mtr. and 450 sq. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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