M/S. RAJ RATAN PALAS CO. OP. HSG. SOCIETY LTD, v. THE DCIT CIR 25(3),

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI J.SUDHAKAR R EDDY(A.M) ITA NO.674/MUM/2004(A.Y. 1997-98) RAJ RATAN PALACE CO .OP. HSG. SOCIETY LTD. PLOT NO.60 SHANKAR LANE KANDIVILI (W) MUMBAI 400 067. PAN:AAATR 3423Q (APPELLANT) VS. THE DCIT CIR. 25(3) PRATYAKSHKAR BHAVAN BANDRA KURLA COMPLEX BANDRA (W) MUMBAI 51 (RESPONDENT) APPELLANT BY : SHRI S.N.INAMDAR RESPONDENT BY : SHRI AJIT KUMAR SINHA ORDER PER N.V.VASUDEVAN J.M THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORD ER DATED 24/4/2003 OF CIT(A) 25 MUMBAI RELATING TO ASSESSMENT YEAR 19 97-98. THE GROUNDS OF APPEAL RAISED BY ASSESSEE READ AS FOLLOWS: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED BOTH ON FACTS AND IN LAW IN SUSTAINING THE ADDITION IN RESP ECT OF AMOUNTS PAID BY THE BUILDERS TO THE MEMBERS UNDER AN INDEPENDENT CONTRACT AS INCOME OF THE APPELLANT WITHOUT EVEN INDICATING TH E HEAD UNDER WHICH IT FALL; 2. HAVING HELD THAT THE DEVELOPERS PAID AMOUNTS TO MEMBERS TO AVOID FURTHER COMPLICATIONS AND WITH A VIEW TO SMOOTH EXE CUTION OF THE PROJECT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN HOLDING THAT AMOUNT PAID TO THE MEMBERS FOR THE AFO RESAID CONSIDERATION IS STILL INCOME IN THE HANDS OF THE S OCIETY; 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THERE WAS ANY TRANSFER OF CAPITAL ASSET AND IN ANY CASE CONSIDERATION RECEIVED BY OR ACCRUING TO THE SOCIET Y ALONE COULD BE SUBJECTED TO TAX; ITA NO.674/MUM/2004(A.Y. 1997-98) 2 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE SUM OF RS. 3 02 16 828/- WAS LIABLE TO TAX AS CAPITAL GAIN WITHOUT SPECIFYING:- A) NATURE OF CAPITAL ASSET TRANSFERRED B) ITS DATE OF ACQUISITION C) COST OF IMPROVEMENT IF ANY AND MOST IMPORTANTLY D) THE COST OF ACQUISITION 5. HE FAILED TO DEAL WITH THE CONTENTION THAT NEITH ER THE COST OF ACQUISITION NOR THE COT OF IMPROVEMENT IS ASCERTAIN ED OR WAS ASCERTAINABLE THE MACHINERY PROVISIONS FAILED AND NO CHARGE COULD BE LEVIED; 6. REASONS ASSIGNED FOR SUSTAINING THE ADDITIONS AR E WRONG INSUFFICIENT SELF CONTRADICTORY AND CONTRARY TO L AW AND FACTS; 2. THE ASSESSEE IS A REGISTERED COMPANY-OPERATIVE H OUSING SOCIETY HAVING 51 MEMBERS AND DULY ELECTED MANAGING COMMIT TEE. THE SOCIETY IS THE OWNER OF THE PROPERTY BEARING PLOT NO.60 AND C .T.S. NO.440-B OF VILLAGE MALAD(NORTH) SITUATED AT SHANKAR LANE KANDIVILI ( WEST) MUMBAI 400 067 ADMEASURING 3316 SQ.METERS OR THEREABOUTS. TOGETHE R WITH RAJ RATAN PALACE BUILDING IN FRONT AND A BUNGALOW GARAGES AND OTHER STRUCTURES STANDING THEREON AND MORE PARTICULARLY DESCRIBED IN THE SCH EDULE HEREUNDER WRITTEN(HEREINAFTER REFERRED TO AS THE SAID PROPER TY ). THE SAID RAJ RATAN PALACE IS A MULTISTORIED BUILDING CONSISTING OF THE GROUND AND SIX UPPER FLOORS HAVING RESIDENTIAL FLATS IN OCCUPATION OF TH E MEMBERS OF THE SOCIETY AND A TERRACE. THE BUNGALOW ON THE SAID PROPERTY C ONSISTING OF GROUND FLOOR OF 72.45 SQ. MTRS. PLINTH AREA WITH TILED ROOF WAS IS OCCUPATION OF KUM. VASANTBEN DAUGHTER OF HIRALAL MOTICHAND SHAH AS A TENANT OF THE SOCIETY PAYING RS.25/- P.M AS RENT TO THE SOCIETY AND SHE HAS BEEN IN EXCLUSIVE POSSESSION AND USE OF THE BUNGALOW AFORESAID. THE ENTIRE F.S.I OF THE SAID PROPERTY HAS ALREADY BEEN FULLY CONSUMED IN THE CON STRUCTION OF THE SAID MULTISTORIED BUILDING AND THE SAID BUNGALOW/STRUCTU RE ON THE SAID PROPERTY. THE SOCIETY INVITED OFFER FROM BUILDERS AND DEVELOP ERS FOR REDEVELOPMENT OF ITS PROPERTY BY CONSTRUCTION OF A NEW MULTI-STOREY BUILDING BEHIND THE RAJ ITA NO.674/MUM/2004(A.Y. 1997-98) 3 RATAN PALACE BUILDING BY MEANS OF T.D.R FROM ELSEW HERE AND BY THE CONSUMPTION OF AVAILABLE F.S.I OF THE SAID PROPERTY AFTER DEMOLISHING THE EXISTING BUNGALOW IN OCCUPATION OF KUM. VASANTEN HI RALAL SHAH AS TENANT OF THE SOCIETY AT THE COST OF THE BUILDERS OR DEVELOP ERS. IN PURSUANCE OF THE ABOVE M/S. NEW INDIA CONSTRUCTION CO. SUBMITTED TE NDER FOR DEVELOPMENT OF THE SOCIETYS SAID PROPERTY AND AT THE SPECIAL GENE RAL BODY MEETING HELD ON DECEMBER 19 1995 THE SAID OFFER WAS ACCEPTED BY T HE SOCIETY AND A SUB- COMMITTEE WAS FORMED AND APPOINTED AND AUTHORIZED F OR THE PURPOSE OF COMPLETING NEGOTIATIONS WITH AND TO ENTER INTO AGRE EMENT WITH THE DEVELOPERS M/S. NEW INDIA CONSTRUCTION CO. FOR RE-DEVELOPMENT OF AND CONSTRUCTION ON THE SOCIETYS SAID PROPERTY. 3. IN PURSUANCE OF THE ABOVE THE SOCIETY AGREED T O GRANT TO THE DEVELOPERS HEREIN PERMISSION LEAVE AND LICENCE TO ENTER UPON THE SOCIETYS AND SAID PROPERTY AND WITH THE RIGHT TO DEMOLISH THE SAID BU NGALOW AND CONSTRUCT A NEW MULTI-STOREY R.C.C. BUILDING ON THE TERMS AND CONDITIONS MUTUALLY AGREED UPON BY AND ON BEHALF OF THE SOCIETY AND THE DEVELOPERS. 4. THE TERMS AND CONDITIONS SO AGREED UPON BY THE A SSESSEE ITS MEMBERS AND THE DEVELOPER WERE PUT IN THE FORM OF A N AGREEMENT DATED 18/5/1996. BY THE AFORESAID AGREEMENT THE BUILDER WAS ALLOWED TO CARRY OUT THE DEVELOPMENT SUBJECT TO SEVERAL TERMS AND CO NDITIONS. CLAUSE 12 & 13 OF THE AGREEMENT IS RELEVANT FOR THE PRESENT APP EAL AND IT READS AS FOLLOWS: 12. IT IS AGREED BETWEEN THE SOCIETY AND THE DEVE LOPERS THAT THE AREA OF THE SAID PROPERTY SHALL BE DEEMED TO BE 1300 SQ. METERS AND THE MONETARY CONSIDERATION OR COMPENSATION PAYABLE TO T HE SOCIETY AND THE MEMBERS OF THE SOCIETY SHALL BE AT THE RATE OF RS. 1 431/- (RUPEES ONE THOUGH FOUR HUNDRED THIRTY ONE) PER SQ. FT. OF NE PROPOSED BUILTUP AREA (F.S.I) AS WOULD BE SANCTIONED BY B.M.C AND O N THE BASIS THAT THE DEVELOPERS SHALL PROCURE AND USE T.D.R TO THE EXTENT OF 40% OF THE NET AREA OF THE SAID PROPERTY. HOWEVER IN CON SIDERATION OF THE ITA NO.674/MUM/2004(A.Y. 1997-98) 4 SOCIETY HAVING AGREED TO ALLOW THE DEVELOPERS TO CO NSUME 40% OF T.D.R AS STATED ABOVE THE DEVELOPERS SHALL PAY TO T HE SOCIETY THE SUM OF RS. 2 51 000/-(RUPEES TWO LACS FIFTY ONE THOUSAN D) AS COMPENSATION OUT OF THE TOTAL CONSIDERATION OF RS.2 00 16 828/- (RS. TWO CRORES SIXTEEN THOUSAND EIGHT HUNDRED TWENTY EIGHT ONLY) P AYABLE TO THE SOCIETY AND MEMBERS. 13. IT IS ALSO AGREED BETWEEN THE SOCIETY AND THE DEVELOPERS THAT IN CASE THE DEVELOPERS DESIRE TO UTILIZE MORE T.D.R TH AN TO THE EXTENT OF THE AFORESAID 40% OF THE NET AREA OF THE SAID PROPE RTY AS PROVIDED IN CLAUSE 12 ABOVE BUT NOT EXCEEDING 80% OF THE TOTAL AREA OF THE SAID PROPERTY IN ANY CASE IN SUCH EVENT THE DEVELOPERS SHALL PAY TO THE SOCIETY AND THE INDIVIDUAL MEMBERS OF THE SOCIETY P ROPORTIONATELY ADDITIONAL COMPENSATION AT THE RATE OF RS.1341/-(R S. ONE THOUSAND THREE HUNDRED FORTY ONE) PER SQ. FT. OF NET PROPOS ED BUILT UP AREA WHICH SHALL BE PAID BY THE DEVELOPERS TO THE SOCIET Y AND THE INDIVIDUAL MEMBERS IN THE SAME MANNER AS PROVIDED IN THEIR IND IVIDUAL AGREEMENT. 5. IT IS NOT IN DISPUTE THAT THE ASSESSEE SOCIETY WAS PAID ONLY A SUM OF RS. 2 51 000/- . THE CONSIDERATION MENTIONED IN CL AUSE 12 OF THE AGREEMENT OF RS. 2 00 16 828/- WAS LATER REVISED TO A SUM OF RS. 3 02 16 828/- BECAUSE OF THE ADDITIONAL FSI THAT THE BUILDER HAD CONSTRUC TED. IT IS ALSO NOT IN DISPUTE THAT THIS SUM OF RS. 3 02 16 828/- WAS PAID BY THE DEVELOPER TO THE INDIVIDUAL MEMBERS OF THE SOCIETY TOTALING IN ALL A BOUT 51. IT IS ALSO FURTHER NOT IN DISPUTE THAT SOME OF THE MEMBERS HAD OFFERED THE MONEY RECEIVED FROM THE DEVELOPER TO TAX IN THE INDIVIDUAL RETURN OF INCOME FILED BY THEM. THE ASSESSEE HAS FIELD BEFORE US A CHART SHOWING T HE AMOUNT RECEIVED BY THE SOCIETY AND 51 OF ITS MEMBERS FROM THE DEVELOPER AN D AS TO HOW THE MEMBERS HAVE OFFERED THE SAME TO TAX. THIS IS AVAI LABLE IN COMPILATION NO.3 PAGES 1 TO 3. 6. THE ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y 1997-98. THE ASSESSEE DID NOT OFFER ANY SUM TO TAX IN RESPECT OF THE AGRE EMENT DATED 18/5/1996. ITA NO.674/MUM/2004(A.Y. 1997-98) 5 THE ASSESSEE WAS CALLED UPON BY THE ASSESSING OFFIC ER TO SHOW CAUSE AS TO WHY THE SUM OF RS. 3 02 16 828/- SHOULD NOT BE BROU GHT TO TAX IN THE HANDS OF THE ASSESSEE. A SUMMONS UNDER SECTION 131 OF T HE ACT HAD ALSO BEEN ISSUED TO THE DEVELOPMENT M/S. NEW INDIA CONSTRUCTI ON COMPANY. THE DEVELOPER HAD CONFIRMED THAT THE MONIES WERE PAID T O THE INDIVIDUAL MEMBERS OF THE SOCIETY AND INDIVIDUAL AGREEMENTS WE RE ENTERED INTO WITH THEM. THEY ALSO CONFIRMED THAT EXCEPT RS. 2 51 000 /- NO AMOUNT WAS PAID TO THE ASSESSEE. 7. BEFORE THE ASSESSING OFFICER THE ASSESSEE SUBMIT TED THAT NO INCOME CAN BE BROUGHT TO TAX IN ITS HANDS BY VIRTUE OF THE AGREEMENT DATED 18/5/96. THE ASSESSING OFFICER HOWEVER WAS OF THE VIEW THAT THE SOCIETY I.E. THE ASSESSEE WAS THE OWNER OF THE LAND AND BY VIRTUE O F CLAUSE 12 & 13 OF THE AGREEMENT DATED 18/5/1996 IT WAS ENTITLED TO THE EN TIRE COMPENSATION OF RS. 3 02 16 828/-. HE WAS OF THE VIEW THAT THE ASSESS EE HELD A CAPITAL ASSET AND ALLOWED THE DEVELOPER NAMELY M/S.NEW INDIA CONS TRUCTION COMPANY TO CONSTRUCT THE MULTISTORIED BUILDING ON THE SURPLUS LAND BELONGING TO THE SOCIETY AND RECEIVED COMPENSATION. THE ASSESSING O FFICER HELD THAT THE SAID RECEIPT OF COMPENSATION WAS TAXABLE AS PER THE PROV ISIONS OF SECTION 2(24) OF THE ACT. HE ALSO HELD THAT THE AGREEMENT BETWEEN T HE DEVELOPER M/S. NEW INDIA CONSTRUCTION COMPANY AND THE INDIVIDUAL 51 ME MBERS OF THE SOCIETY WAS ONLY TO FACILITATE PAYMENT BY THE DEVELOPER AND DOES NOT ABSOLVE THE SOCIETY FROM THE TAXABILITY OF THE ENTIRE PROCEEDIN GS. THUS A SUM OF RS. 3 02 16 828/- WAS ADDED BY THE ASSESSING OFFICER. 8. BEFORE CIT(A) THE ASSESSEE SUBMITTED: (1) THAT THE ENTIRE TDR AVAILABLE ON THE LAND OWN ED BY THE SOCIETY WAS ALREADY EXHAUSTED AND THAT THE DEVELOPER M/S.NEW IN DIA CONSTRUCTION COMPANY WAS ALLOWED TO USE TDR TO BE PURCHASED BY T HEM FROM OUTSIDE PARTIES. ITA NO.674/MUM/2004(A.Y. 1997-98) 6 (2) THE CONSIDERATION WAS PAID BY THE DEVELOPER FO R GRANTING CONSENT TO CONSUME TDR PURCHASED BY THE DEVELOPER FROM THIRD P ARTIES. THE SOCIETY CONTINUED TO BE THE OWNER OF THE LAND AND NO CHANGE IN LEGAL OWNERSHIP OF LAND HAD TAKEN PLACE. (3) THE ASSESSING OFFICER BROUGHT THE ENTIRE RECEIP T TO TAX AS INCOME AND IN ANY EVENT WHAT HE COULD HAVE BROUGHT TO TAX WAS ONL Y THE CAPITAL GAIN AFTER ALLOWING DUE INDEXATION AND OTHER BENEFITS. (4) THE DEVELOPER PAID AMOUNTS 51 INDIVIDUAL MEMB ERS UNDER SEPARATE AGREEMENTS AND THAT PAYMENT WAS MADE ONLY TO ENSURE THAT THE MEMBERS COMPANY-OPERATED IN THE PROCESS OF DEVELOPMENT WITH OUT RAISING ANY OBJECTION AT ANY POINT OF TIME. (5) THUS IF AT ALL THERE WERE RECEIPTS ONLY IN TH E HANDS OF THE MEMBERS OF THE SOCIETY AND IF AT ALL ANY INCIDENCE OF TAXATIO N COULD BE ONLY IN THE HANDS OF THE MEMBERS AND NOT IN THE HANDS OF THE SOCIETY. 9. THE CIT(A) HOWEVER DID NOT AGREE WITH THE SUBMI SSIONS OF THE ASSESSEE AND HE HELD AS FOLLOWS 2.6 THE ABOVE SUBMISSIONS OF THE APPELLANT HAVE BEEN CONSIDERED BY ME CAREFULLY. I HAVE ALSO GONE THROUGH THE ASSESS MENT ORDER. THE APPELLANT IS A REGISTERED HOUSING CO-OP SOCIETY HAV ING 51 MEMBERS. THE SOCIETY WAS THE OWNER OF THE SURPLUS LAND FOR W HICH AN AGREEMENT DATED 18/05/1996 WAS ENTERED INTO BY THE SOCIETY AN D THE MEMBERS TOGETHER TO ALLOW THE SAID DEVELOPER TO DEVELOP THE PROPERTY. AS PER CLAUSE 12 AND 13 OF THE SAID AGREEMENT THE SOCIETY ALONGWITH MEMBERS RECEIVED A CONSIDERATION OF RS.3 02 16 828/-. ADMI TTEDLY THE SOCIETY IS THE OWNER OF THE LAND. THE SOCIETY IS A LEGAL ENTI TY AND CAPABLE OF ENTERING INTO LEGAL DOCUMENTS WITH THE DEVELOPERS. WITHOUT THE CONSENT OF THE SOCIETY THE INDIVIDUAL MEMBERS HAVE NOT SAY IN THE MATTER. IT IS THE SOCIETY WHO INVITED THE BIDS FOR ALLOTMENT OF CONTRACT FOR DEVELOPMENT OF THE PROPERTY. IT IS THEREFORE N OTICED THAT THE SAID SOCIETY IS INVOLVED AT EVERY STEP IN THIS TRANSACTI ON. THE ROLE PLAYED BY THE SOCIETY IS AS PER THE LAW. THE DEVELOPER I.E. M/S. NEW INDIA CONSTRUCTION CO. AS A ABUNDANT PRECAUTION HAS ALSO MADE SEPARATE AGREEMENTS WITH EACH OF THE MEMBERS OF THE SOCIETY SO AS TO AVOID ANY FUTURE COMPLICATIONS IN THE MATTER AND WITH A VIEW TO SMOOTH EXECUTION OF THE PROJECT WHICH THE SAID DEVELOPER H AS TAKEN INTO HAND. THE SEPARATE PAYMENT TO EACH MEMBERS OF THE SOCIET Y MADE BY THE DEVELOPER WAS WITH THE CONSENT OF THE SOCIETY. THE RE IS NO DOUBT THAT THE WHOLE RECEIPTS IN THE HANDS OF SOCIETY IS A CAP ITAL IN NATURE AS THE SOCIETY HAS AGREED TO GET ITS LAND/RIGHTS TITLE ETC . TRANSFER TO THE BUILDER TO DEVELOP AND SELL THE SAME. THE APPELLANTS CONT ENTION THAT NO TRANSFER OF CAPITAL ASSET HAS TAKEN PLACE IS NOT AC CEPTABLE. THE APPELLANT HAS KNOWINGLY OR UNKNOWINGLY NOT TAKEN IN TO ACCOUNT THE ITA NO.674/MUM/2004(A.Y. 1997-98) 7 TAX IMPLICATIONS IN THE TRANSACTION. THUS THIS IS A FACT THAT TRANSFER OF LAND/RIGHTS HAS TAKEN PLACE; THE RECEIPTS ARE IN TH E NATURE OF CAPITAL RECEIPTS AND PROVISIONS OF I.T. TAX ARE THEREFORE A TTRACTED. THE APPELLANT SOCIETY WAS THEREFORE UNDER OBLIGATION TO MAKE THE PAYMENT OF TAX AND AFTER PAYING THE TAXES THE NET RECEIPTS COULD HAVE BEEN DISTRIBUTED AMONGST THE MEMBERS. INSTEAD OF THAT T HE SOCIETY HAS ALLOWED THE BUILDER TO PAY EACH MEMBER SEPARATELY I GNORING THE TAX IMPLICATIONS. IN THIS SITUATION NEITHER THE SOCIET Y HAS PAID THE TAXES WHICH WAS LEGITIMATELY DUE FROM IT NOR THE MEMBERS HAVE PAID THE TAXES. I THEREFORE HOLD THAT THE RECEIPT OF RS. 3 02 16 828/- IS A CAPITAL RECEIPT IN THE HANDS OF THE SOCIETY AND CAP ITAL GAIN TAX IS EXIGIBLE IN THE HANDS OF THE APPELLANT SOCIETY. TH E ADDITION MADE BY THE AO IS THEREFORE CONFIRMED SUBJECT TO THE CONDIT ION THAT INDEXATION MAY BE ALLOWED IF OTHERWISE ALLOWABLE AND AFTER DUE VERIFICATION. IT HAS ALSO BEEN BROUGHT TO MY NOTICE THAT A FEW MEMBERS H AVE PAID THE CAPITAL GAIN TAX INDIVIDUALLY. IN CASE THE MEMBERS HAVE PAID THE TAXES CREDIT TO THAT EXTENT MAY BE ALLOWED AGAINST THE TA X LIABILITY OF THE SOCIETY AFTER DUE VERIFICATION. 9. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSE E HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 10. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNSE L FOR THE ASSESSEE WHO REITERATED THE STAND OF THE ASSESSEE AS WAS PUT FORTH BEFORE REVENUE AUTHORITIES. THE LD. D.R RELIED ON THE ORDERS OF T HE REVENUE AUTHORITIES. THE LD. COUNSEL FOR THE ASSESSEE HAS FIELD BEFORE US CE RTAIN JUDICIAL PRONOUNCEMENTS FOR THE PROPOSITION THAT IN ANY EVEN THAT THE CONSIDERATION RECEIVED FOR ASSIGNING OF RIGHTS TO RECEIVE TDR WAS NOT LIABLE TO TAX. HE ALSO FILED BEFORE US COPIES OF DECISION OF THE TRIBUNAL IN THE CASE OF 21 MEMBERS OF THE ASSESSEE SOCIETY IN WHOSE HANDS THE AMOUNT REC EIVED FROM THE DEVELOPER WERE BROUGHT TO TAX. THE LD. COUNSEL FOR THE ASSE SSEE ALSO FILED BEFORE US A COPY OF THE DECISION OF THE ITAT LUCKNOW BENCH IN THE CASE OF JYOTI PATRA VS. ITO 92 ITD 423 WHEREIN IT WAS HELD THAT WHERE THE CAPITAL ASSET WHICH SUBJECT MATTER OF TRANSFER DOES NOT HAVE COST OF AC QUISITION NO CAPITAL GAIN CAN BE COMPUTED. IT WAS HIS CONTENTION THAT THE RI GHT TO USE TDR EVEN ASSUMING WAS A CAPITAL ASSET DID NOT HAVE ANY COST OF ACQUISITION. ITA NO.674/MUM/2004(A.Y. 1997-98) 8 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN OU R VIEW THE ENTIRE APPROACH ADOPTED BY THE REVENUE AUTHORITIES WAS ERR ONEOUS. WE HAVE ALREADY SEEN THAT UNDER THE AGREEMENT DATED 18/5/19 96 THE SOCIETY GAVE PERMISSION TO THE DEVELOPER TO CONSTRUCT ON THE SOC IETYS LAND. NO PART OF THE LAND WAS EVER TRANSFERRED BY THE SOCIETY. THE SOCI ETY MERELY GAVE PERMISSION TO THE DEVELOPER TO CARRY OUT DEVELOPMENT IN THE RE AR SIDE OF THE EXISTING BUILDING RAJ RATAN PALACE AFTER DEMOLISHING A SMALL BUNGALOW WHICH WAS IN EXISTENCE. CLAUSE 12 & 13 OF THE AGREEMENT DATED 1 8/5/96 CLEARLY MENTIONS THAT THE DEVELOPER WILL PAY COMPENSATION AT RS. 143 1/- TO THE SOCIETY AND MEMBERS. THE SUM WAS QUANTIFIED AT RS. 2 00 16 828 /-. OUT OF THIS ONLY A SUM OF RS. 2 51 000 WAS PAID TO THE SOCIETY. ADMITT EDLY THE REMAINING SUM AND THE ADDITIONAL SUM PAYABLE UNDER CLAUSE 13 OF T HE AGREEMENT DATED 18/5/96 WAS PAID TO THE INDIVIDUAL MEMBERS OF THE S OCIETY UNDER 51 DIFFERENT AGREEMENTS. THUS IT IS CLEAR THAT THE AS SESSEE DID NOT PART WITH ANY RIGHTS AND DID NOT RECEIVE ANY CONSIDERATION EXCEPT A SUM OF RS.2 51 000. IN SUCH CIRCUMSTANCES WE FAIL TO SEE AS TO HOW THE RE COULD BE ANY INCIDENCE OF TAXATION IN THE HANDS OF THE ASSESSEE. BESIDES THE ABOVE WE ALSO FIND THAT THE ORDER OF THE ASSESSING OFFICER IS VAGUE. IT IS NOT CLEAR AS TO WHETHER THE SUM IN QUESTION IS BROUGHT TO TAX AS CAPITAL GAIN I N THE HANDS OF THE ASSESSEE OR AS INCOME UNDER SECTION 2(24) OF THE AC T. IN OUR VIEW NEITHER OF THE ABOVE PROVISIONS CAN BE PRESSED INTO SERVICE FO R BRINGING THE SUM IN QUESTION TO TAX IN THE HANDS OF THE ASSESSEE. WE H AVE ALREADY SEEN THAT THERE WAS NO RECEIPT BY THE ASSESSEE EXCEPT A SUM O F RS.2 51 000/-. THE SUM SO RECEIVED WAS FOR MERELY GRANTING CONSENT TO CONSUME TDR PURCHASED BY THE DEVELOPER FROM A 3 RD PARTY. THE SOCIETY CONTINUES TO BE THE OWNER OF THE LAND AND NO CHANGE IN OWNERSHIP OF LAND HAD TAK EN PLACE. MERE GRANT OF CONSENT WILL NOT AMOUNT TO TRANSFER OF LAND/OR ANY RIGHTS THEREIN. BESIDES THE ABOVE IT IS ALSO SEEN THAT THE SOME OF THE IND IVIDUAL MEMBERS HAD ITA NO.674/MUM/2004(A.Y. 1997-98) 9 OFFERED THE RECEIPTS FROM THE DEVELOPER TO TAX AND THE SAME HAS ALSO BEEN BROUGHT TO TAX IN THE HANDS OF THE INDIVIDUAL MEMBE RS. IN THIS SCENARIO WE ARE OF THE VIEW THAT THE ADDITION MADE IN THE HANDS OF THE ASSESSEE SOCIETY IS WITHOUT ANY BASIS. CONSEQUENTLY THE ADDITION MADE IN THE HANDS OF THE SOCIETY IS DIRECTED TO BE DELETED. IN VIEW OF THE ABOVE CONCLUSION ON FACTS OF THE CASE WE HAVE NOT DISCUSSED THE DECISIONS WHICH WERE CITED BEFORE US BY THE LEARNED COUNSEL FOR THE ASSESSEE. 11. IN THE RESULT THE APPEAL OF THE ASSESEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 25 TH DAY OF FEBRUARY 2011. SD/- SD/- (J.SUDHAKAR REDDY) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED. 25TH FEB.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RB BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR I TAT MUMBAI BENCHES MUMBAI. VM. ITA NO.674/MUM/2004(A.Y. 1997-98) 10 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 21/2/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 22/2/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER