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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Income Tax Officer Hemant A. Desai Ward 31(1)(5) B-10 Kantilal Niwas Off Prattakshkar Bhavan, C-11 Aarey Rd, Shreyas Colony, Vs. R.No.707 BKC Bandra (E) Goregaon(E) Mumbai-50 Mumbai-400063 Pin-AFFFD6476Bss .. Appellant Respondent Revenue by .. Shri Rajat Mittal, DR .. Shri. Vijay Joshi, AR Assessee by Date of hearing .. 22-05-2017 .. Date of pronouncement 24-05-2017 O R D E R PER MAHAVIR SINGH, JM:
This appeal by the Revenue is arising out of the order of CIT(A)-42, Mumbai, in appeal No. CIT(A)-42/IT-132/13-14 dated 20-03-2015. The Assessment was framed by ITO, Ward 24(3)(1), Mumbai for the A.Y. 2008-09 vide order dated 25-03-2013 u/s 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).
2. The first issue in this appeal of Revenue is against the order of CIT(A) deleting the addition of short term capital gain made by AO on account of transfer of development rights amounting to Rs. 1,25,68,000/-. For this Revenue has raised following two grounds: -
“1. On the facts and in the circumstances of the case and ill the Ld. CIT(A) erred in deleting the addition of Rs. 1,25,68,000/- made on account of short term capital gain on transfer of development rights ignoring the fact that the assessee himself has admitted that he has received Rs.6 1,80,732/- for the plot from MIs. V K Developers.
Hemant A. Desai A.Y:08-09 2. On the facts and in the circumstances of the case and in law, the Ld. C 11(A) erred in deleting the addition of Rs.1,25,68.000/- made on account of short term capital gain on transfer of development rights ignoring the fact that there is contradiction in the assessee's submission during the course of assessment proceedings and during the course of appellate proceedings and the AO has made addition on the basis of certificate received from the bank of the assessee.”
We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the AO made addition of short-term capital gain for transfer of development right to M/s VK Developers. The facts are that the assessee vide joint agreement/ development agreement dated 21-07- 2006 with the developer M/s VK Developers granted the rights to develop the property bearing CTS No. 36 admeasuring about 830.4 square meters. The assessee obtained leaseholds rights for 99 years on 09-03-1988 from the owner and subsequently, legal suit was filed by the local heirs of the owner in 2004 and out of court settlement was reached qua a sum of Rs. 5,00,000/- paid vide 7 cheques. The AO noted that the assessee entered into rectification deed with the developer on 21-09-2007, whereby full details of flats of the proposed building to be shared by the assessee and the developer were provided. Accordingly, this was treated as transfer for AY 2008-09 in view of rectification deed dated 21-09- 2007 and treated the capital gain of Rs. 1,25,68,000/- being short-term capital gain, the CIT(A) deleted the capital gain. Aggrieved, now Revenue is in appeal before us.
Before us, the learned Counsel for the assessee filed lease deed dated 09- 03-1988 executed by the assessee with the lessor which merely gives the rights and subsequently is consent term decree dated 17-08-2004 filed in the Civil Court, wherein Consent Terms were recorded by the court which reads as under: -
Hemant A. Desai A.Y:08-09 “Consent Terms
Agreed, declared and confirmed that the writing lease deed, dated 9th March, 1988 is valid, subsisting and binding upon the Legal heirs of late. AUSTIL PASCAL CONSALVES and so also the Defenders herein.
Agreed, declared and confirmed that the writing Lease Deed was executed with an intention to develop the property by the Plaintiff at his own costs and expenses and the rights though not referred in the Lease Deed but the same was with an intention to develop the property by the Leasees therein and the Plaintiff herein who shall take all the use and Plaintiff herein who shall take all the use and benefits arising out of the said plot of land including that of the T.D.R, F.S.I. Award and / or any other rights in respect of the property i.e. the suit land;
3. Agreed, declared and confirmed that the title of the property shall be confirmed as and when required by the Leasees therein the agreement dated 9th March, 1988 which is valid and subsisting one even today. The parties hereto agree and confirm that as and when required the Leasees shall make a request for Conveyance of the property after construction of the building on the suit plot of land i.e. C.T.S. No 35 admeasuring about 866 sq. mtrs, or thereabout at Revenue village Pahadi Eksar, Taluka- Borivali, Mumbai Sub-urban District, City Survey Office, Goregaon, Mumbai along with the structure standing thereon.
Hemant A. Desai A.Y:08-09 4. Agreed, declared and confirmed that the plan attached at page No24 of the Plaint is a correct and true Sketch Plan and the Parties agree the Identification of the Plot of land.
Agreed, declared and confirmed that the Land bearing C.T.S. No 35 2hich is the suit plot of land shall be developed at the costs and expenses of the Plaintiff herein and the consideration was already plaid vide Agreement dated 9th March, 1988 which is termed as Lease Deed.”
5. The assessee also filed deed of rectification dated 21-09-2007 in its paper book which is clearly a rectification deed and nothing else. Accordingly, the learned Counsel for the assessee argued that the right accrue on the date of joint agreement dated 21-09-2007 and not on rectification deed dated 21-09-2007, it means that the assessment has to be made in AY 2007-08 of the long term capital gain and not in AY 2008-09 as in the present case made by the AO. Without prejudice to the above, the learned Counsel for the assessee stated that it is a long term capital gain in any case and it is to be in term of lease deed dated 09-03-1988 when the assessee has acquired this property and not on the rectification deed dated 21-09-2007. Accordingly, the learned Counsel for the assessee stated that the CIT(A) has rightly deleted the addition by observing in Para 4.4. as under –
“4.4 I have considered the submissions, facts and the documents on records On a perusal of the joint development agreement, the ratio of sharing the saleable area between the Appellant and N/s. V.K. Developers would be 50% of the total saleable FSI. The Appellant was in receipt of Rs.30,00,000 from MIs. V.K. Developers which was to be returned after the completion of the entire project. The joint development agreement does not refer to the land Page 4 of 8
Hemant A. Desai A.Y:08-09 FSI cost' payable to the Appellant. The Appellant has further contended that this is an unilateal entry passed by M/s. V.K. Developers. The Appellant also drew my attention to the fact that even though 'M/s. V.K. Developers have credited the Appellant's account' as on 31.03.2008, they have not made any payments to the Appellant even after a span of five and a half years.
Considering the facts of the case, I am of the view that the amount of adjustment made by the AO of Rs.1,25,68,000 as short term capital gains is merely on the basis of the ledger account provided by M/s. V.K. Developers. The Appellant has no corroborated the same with the facts of the case or the agreements governing this transaction. Being a development project, all the receipts and payments are duly recorded through agreements only. In the instant case, the land FSI cost is not covered by any agreement. Also the amount is outstanding for more than 3 years now. Accordingly, I hereby direct the AO to delete the additions made of Rs.1,25,68,000 in the absence of any substantive evidences. This ground of appeal is allowed.”
6. In view of the above facts and discussion carried out and the findings of CIT(A), we find no infirmity in the order of CIT(A) in deleting the addition. We confirm the order of CIT(A) and this issue of Revenue’s appeal is dismissed.
7. The next issue in this appeal of Revenue is as regards to deletion of disallowance made by AO on expenses on which no TDS was deducted under section 194J of the Act by invoking the provisions of section 40a(ia) of the Act. For this Revenue contended that the CIT(A) admitted additional evidences
Hemant A. Desai A.Y:08-09 without giving opportunity to the AO in contravention of Rule 46A of IT rules 1962. For this Revenue has raised the following ground No.3: -
“On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.32,4ft000/- made u/s. 40(a)(ia) by admitting additional evidence at the appellate stage without °giving° opportunity to AO in contravention of Rule 46A.”
We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the assessee before CIT(A) for the first time taken plea that the assessee is not covered under the tax audit under section 44AB of the Act in earlier years and accordingly, it is not required to comply that the provision of section 194J of the Act. We find that the CIT(A) has adjudicated the entire issue on this very fact which reads as under: -
“5.3 I have considered the submissions and facts on records. On a perusal of the same it appears that the Appellant is not covered under tax audit u/s. 44AB in the earlier year and accordingly, the Appellant was not required to comply with the provisions of section 194J of the Income-tax Act, 1961. Considering that the TDS. provisions are not applicable; I am not deciding on the merits of the nature of expenses. Accordingly, I hereby direct the- AO to delete the additions made of 40(a)(ia) of the Income-tax Act, 1961. This ground of appeal is allowed.”
We find that this is a fact that the assessee is not liable to TDS but this needs verification at the level of the AO. Hence, we remit the issue back to the file of the AO for verification purpose only. Accordingly, this issue of Revenue’s appeal is set aside and allowed for statistical purposes.
Hemant A. Desai A.Y:08-09 10. The next issue in this appeal of Revenue is against the order of CIT(A) deleting the addition of indirect expense of Rs. 1,54,817. For this Revenue has raised following ground No.4: -
“On the facts and in the circumstances of the case and in law, the U. CJT(A) erred in deleting the addition of Rs.1,54,817/- made out of indirect expenses on adhoc basis ignoring the fact that assessee did not furnish any documentary evidence in support of the indirect expenses claimed by him.”
We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the AO disallowed 20% of indirect expenses of Rs. 7,74,086/- at Rs. 1,54,817/- in the absence of documentary evidences of the same. The CIT(A) deleted the addition on the basis that the AO has made disallowance on adhoc basis. Aggrieved, Revenue is in appeal before us. We find that the AO has disallowed on the basis that the assessee could not produce the bills and vouchers or like other evidences. The assessee before us could not produce the evidences of expenses; hence, we feel that 10% of disallowance will meet the end of justice. Accordingly, we direct the AO to disallow 10% of the expense. This issue of Revenue’s appeal is partly allowed.
In the result, the appeal of Revenue is partly allowed for statistical purposes. Order pronounced in the open court on 24-05-2017.