The ACIT,(OSD)Circle-10,, Ahmedabad v. Shri Vishwesh S.Patel, Ahmedabad

ITA 2439/AHD/2010 | 2007-2008
Pronouncement Date: 25-10-2013 | Result: Dismissed

Appeal Details

RSA Number 243920514 RSA 2010
Assessee PAN AAVPP8878N
Bench Ahmedabad
Appeal Number ITA 2439/AHD/2010
Duration Of Justice 3 year(s) 2 month(s) 23 day(s)
Appellant The ACIT,(OSD)Circle-10,, Ahmedabad
Respondent Shri Vishwesh S.Patel, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 25-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 25-10-2013
Date Of Final Hearing 20-08-2013
Next Hearing Date 20-08-2013
Assessment Year 2007-2008
Appeal Filed On 02-08-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMADABAD BEFORE SHRI D.K.TYAGI JUDICIAL MEMBER AND SHRI T.R. MEENA ACCOUNTANT MEMBER ITA NO. 2439/AHD/2010 ASSESSMENT YEAR :2007-08 ASST. COMMISSIONER OF INCOME TAX (OSD) CIR-10 1 ST FLOOR NARAYAN CHAMBERS ASHRAM ROAD AHMADABAD V/S. SHRI VISHWESH S. PATEL ORIENTAL HOUSE NR. BHAIKAKA HALL LAW GARDEN ELLISBRIDGE AHMADABAD. PAN NO. AAVPP8878N (APPELLANT) .. (RESPONDENT) ITA NO. 2444/AHD/2010 ASSESSMENT YEAR :2007-08 SHRI VISHWESH S. PATEL ORIENTAL HOUSE NR. BHAIKAKA HALL LAW GARDEN ELLISBRIDGE AHMADABAD. V/S. ASST. COMMISSIONER OF INCOME TAX (OSD) CIR-10 1 ST FLOOR NARAYAN CHAMBERS ASHRAM ROAD AHMADABAD (APPELLANT) .. (RESPONDENT) BY REVENUE SHRI P. L. KUREEL CIT. D.R. /BY ASSESSEE SHRI S. N. SOPARKAR SR. ADV. /DATE OF HEARING 20.08.2013 /DATE OF PRONOUNCEMENT 25.10.2013 O R D E R PER : SHRI T.R.MEENA ACCOUNTANT MEMBER THESE TWO APPEALS ARE CROSS APPEALS FILED BY THE RE VENUE AS WELL AS ASSESSEE. THESE APPEALS ARE EMANATED FROM THE ORDER OF THE LD. CIT(APPEALS)-XVI AHMEDABAD ORDER DATED 21.05.2010 FOR A.Y. 2007-08. BOTH APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS C OMMON ORDER FOR THE SAKE OF ITA NO. 2439 & 2444/AHD/2010 A.Y. 07-08 PAGE 2 CONVENIENCE. THE GROUNDS OF APPEAL OF THE REVENUE AND ASSESSEE ARE REPRODUCED BELOW: GROUNDS OF REVENUES APPEAL (1) THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN H OLDING THAT RS.24 50 000/- WOULD BE TAXABLE UNDER THE HEAD OF I NCOME FROM OTHER SOURCES AN DRS.24 50 000/- WOULD BE TAXABLE U NDER THE HEAD INCOME FROM CAPITAL GAINS AS AGAINST THE VIEW OF TH E A.O. THAT RS.49 LACS IS TAXABLE UNDER THE HEAD INCOME FROM OT HER SOURCES WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE A.O. (1.1) THE LD. CIT(A) XX AHMADABAD HAS ERRED IN LA W AND ON FACTS IN NOT APPRECIATING THAT THE ASSESSEE HAD BEEN EMPLOY ED IN THE CAPACITY OF A DEVELOPER AS PER THE AGREEMENT DATED 21/3/2007 AND THE RIGHT IS MERELY A CONTRACT TO DEVELOP A LAND AN D HAND IT BACK TO THE SOCIETY AT A PRICE FOR RENDERING THE SERVICES A ND CANNOT BE TREATED AS CAPITAL ASSET. (1.2) THE LD. CIT(A) XX AHMADABAD HAS ERRED IN LA W AND ON FACTS IN NOT APPRECIATING THAT EVEN IF THE ASSESSEE WERE TO CONTINUE HOLDING THE DEVELOPMENT RIGHTS HE WOULD HAVE BEEN UNABLE TO DO ANY DEVELOPMENT ACTIVITY; HAD THE CLEARANCE BEEN GIVEN THE INCOME FROM SUCH DEVELOPMENT WOULD HAVE BEEN TREATED AS BU SINESS INCOME. GROUND OF ASSESSEES APPEAL 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN HOLDING THAT 50% OF THE SUM OF RS.4 9 LACS RECEIVED BY THE ASSESSEE ON SURRENDER OF DEVELOPMENT RIGHTS IS TO BE ASSESSED AS INCOME FROM OTHER SOURCES AND 50% THERE OF AS INCOME FROM LONG TERM CAPITAL GAINS AS AGAINST THE ASSESSEES CLAIM THAT THE ENTIRE SUM IS ASSESSABLE AS LONG TER M CAPITAL GAIN. ITA NO. 2439 & 2444/AHD/2010 A.Y. 07-08 PAGE 3 2. THE A.O. OBSERVED THAT ASSESSEE HAD CLAIMED LONG TERM CAPITAL GAIN OF RS.49 00 000/- BUT IT HAD NOT DEDUCTED ANY COST OF ACQUISITION OF CAPITAL ASSET OR ANY EXPENSES UPON TRANSFER OF CAPITAL ASSET. THE A.O. GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE WHICH WAS REPLIED BY THE ASSESSEE. THE A.O. HELD AS UNDER: I. THE ASSESSEE HAD BEEN EMPLOYED IN THE CAPACITY OF A DEVELOPER AS PER THE AGREEMENT DATED 21/3/2007 TO RENDER SER VICES AS STATED IN POINT NO.5.3 OF THIS ORDER I.E. TO DEVELOP THE E NTIRE LAND AND TO IMPLEMENT THE SCHEME TO ARRANGE FOR FINANCE FOR AC QUISITION AND DEVELOPMENT THEREOF TO OBTAIN PERMISSIONS UNDER AP PLICABLE LAWS ETC. II. AS STATED IN POINT NO. 5.3 OF THIS ORDER I T HAS BEEN CLEARLY STATED IN THE TERMINATION AGREEMENT THAT THE ASSESSEE HAD REN DERED SERVICES LIKE USING HIS EXPERTISE IN ACQUISITION OF THE SAID LAND AND IN ASSISTING THE SOCIETY IN OBTAINING VARIOUS PERMISSI ONS ORDERS CONSENTS ETC. FOR THE ACQUISITION OF THE SAID LAND. III. IT IS ALSO FURTHER STATED CLEARLY IN THE AGR EEMENT AS PER POINT 5.3. OF THIS ORDER THAT THE ASSESSEE WAS BEING PAID REMUNER ATION IN CONSIDERATION OF SUCH SERVICES RENDERED BY HIM TO T HE SOCIETY AND ALSO IN FURTHER CONSIDERATION OF CANCELLATION OF SA ID DEVELOPMENT RIGHTS. IV. THE ASSESSEE STATED IN HIS LETTER THAT HE HAD NOT CARRIED OUT A SINGLE ACTIVITY. HOWEVER IT IS CLEARLY STALED IN T HE TERMINATION AGREEMENT WHAT WORK THE ASSESSEE WAS SUPPOSED TO D O AND FOR WHAT WORK THE ASSESSEE IS BEING PAID REMUNERATION F OR AS STATED IN POINT NO. 5.3 OF THIS ORDER. V. SIMPLY BECAUSE THE ASSESSEE HAD THE DEVELOPME NT RIGHTS SINCE 1998 AND THE PROJECT COULD NOT GET APPROVAL OF THE AUDA IT CANNOT ITA NO. 2439 & 2444/AHD/2010 A.Y. 07-08 PAGE 4 BE TREATED AS INVESTMENT OF THE ASSESSEE AS CLAIME D BY THE ASSESSEE STATED IN POINT NO. 5.4 OF THIS ORDER. VI. THIS RIGHT CANNOT BE TREATED AS CAPITAL ASSET AS IT IS MERELY A CONTRACT TO DEVELOP A LAND AND HAND IT BACK TO THE SOCIETY AT A PRICE FOR RENDERING THE SERVICES AS CLEARLY STATED IN THE AGREEMENTS ENTERED INTO. IN VIEW OF THE ABOVE FACTS AND DISCUSSION SUCH REC EIPTS OF RS.49 LACS WERE TREATED AS INCOME FROM OTHER SOURCES NOT BUSINESS INCOME. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O THE ASS ESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO HAD ALLOWED THE APPEAL PA RTLY. THE LD. CIT(A) OBSERVED THAT ONE SIDE THE APPELLANT CLAIMED RS. 49 LACS AS A CAPITAL RECEIPTS WHEREAS ANOTHER SIDE THE REVENUE HAD TREATED IT AS REVENUE RECEIPTS . BUT THE LD. CIT(A) HELD THAT PART CONSIDERATION REPRESENT THE SURRENDER OF DEVELOPMEN T RIGHT WHICH THE APPELLANT HAD OBTAINED IN 1998. THE TERMINATION OF DEVELOPMENT R IGHTS AMOUNTS TO TRANSFER OF A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(47) O F THE IT ACT. FURTHER THE RIGHTS WERE SURRENDERED BY THE APPELLANT TO THE SOCIETY BE CAUSE NECESSARY APPROVAL FROM THE AUDA COULD NOT BE OBTAINED BECAUSE OF DECLARATI ON OF THAT PARTICULAR AREA UNDER RESTRICTED RESIDENTIAL AND UTILITY SERVICES ZONE. THEREFORE HE HELD THAT THE AMOUNT OF RS.49 LACS REPRESENT BOTH THE CONSIDERATION FOR SUR RENDER OF DEVELOPMENT RIGHTS AS WELL AS THE SERVICES RENDERED BY THE APPELLANT IN R ESPECT OF THE LAND. IN THE ABSENCE OF ANY SPECIAL CRITERIA HE HELD THAT 50% OF THE AM OUNT OF RS.49 LACS I.E. 24 50 000/- WAS RECEIVED BY THE APPELLANT FOR THE SERVICES REND ERED AND THE BALANCE 50% I.E. 24.50 000/- WAS TOWARDS THE SURRENDER OF DEVELOPMEN T RIGHTS. IN OTHER WORDS THE AMOUNT OF RS. 24 50 000/- WOULD BE TAXABLE UNDER TH E HEAD INCOME FROM OTHER ITA NO. 2439 & 2444/AHD/2010 A.Y. 07-08 PAGE 5 SOURCES AND THE REMAINING AMOUNT OF RS.24 50 000/- RECEIVED TOWARDS SURRENDER OF THE DEVELOPMENT RIGHTS WOULD BE TAXABLE AS CAPITAL GAIN. 4. NOW BOTH THE REVENUE AND THE ASSESSEE ARE BEFORE US. BOTH THE PARTIES ARGUED THEIR CASES IN LENGTH. BUT FINALLY THEY AC CEPTED THE ORDER OF THE CIT(A) AND NOT PURSUE MUCH. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE RECEIPTS INVOLVED REVENUE AS WELL AS CAPIT AL RECEIPTS THE APPELLANT HAD PROVIDED SOME SERVICES AND ALSO HAD SURRENDERED THE DEVELOPMENT RIGHTS WHICH WERE OBTAINED IN 1998. THUS WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS BOTH THE APPEALS. 6. IN THE RESULT BOTH THE APPEALS ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 25.10.2013 SD/- SD/- ( D.K.TYAGI) (T.R. MEE NA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. $%$& ' '( / CONCERNED CIT 4. ' '(- + / CIT (A) 5. -.+' & ' ++' & 01 % / DR ITAT AHMEDABAD 6. .34 56 / GUARD FILE. BY ORDER/ 7/0' $+ ' ++' & 01 % 9