Swastik Engg. Mfg. Co.Pvt.Ltd.,, Baroda v. The ACIT., Cent.Circle-2,, Baroda

ITSSA 3/AHD/2006 | misc
Pronouncement Date: 04-04-2014 | Result: Partly Allowed

Appeal Details

RSA Number 320516 RSA 2006
Assessee PAN AADCS9480L
Bench Ahmedabad
Appeal Number ITSSA 3/AHD/2006
Duration Of Justice 8 year(s) 2 month(s) 22 day(s)
Appellant Swastik Engg. Mfg. Co.Pvt.Ltd.,, Baroda
Respondent The ACIT., Cent.Circle-2,, Baroda
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 04-04-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 04-04-2014
Date Of Final Hearing 12-03-2014
Next Hearing Date 12-03-2014
Assessment Year misc
Appeal Filed On 12-01-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BENCH AHMEDABAD !' # $ $ $ $ % # BEFORE SHRI ANIL CHATURVEDI ACCOUNTANT MEMBER AND SHRI KUL BHARAT JUDICIAL MEMBER (SS) $./ I.T(SS).A. NO.3/AHD/2006 (BLOCK PERIOD 1-4-1996 TO 2-7-2002) SWASTIK ENGG.MFG.CO.PVT.LTD.3 RBG COMPLEX JALARAM MANDIR ROAD KARELIBAUG BARODA / VS. THE ASST.CIT CENTRAL CIRCLE-2 BARODA #( !' $./)* $./ PAN/GIR NO. : AADCS 9480 L ( (+ / // / APPELLANT ) .. ( -(+ / RESPONDENT ) (+ . ! / APPELLANT BY : MS. URVASHI SHODHAN A.R. -(+ / . ! / RESPONDENT BY : SHRI SUBHASH BAINS CIT-DR 0 / ' / / / / DATE OF HEARING : 12/03/2014 123 / ' / DATE OF PRONOUNCEMENT : 04/04/2014 !4 / O R D E R PER SHRI KUL BHARAT JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-IV AHMEDABA D (CIT(A) FOR SHORT) DATED 10/11/2005 FOR THE BLOCK PERIOD 1 .4.1996 TO 2.7.2002. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF A PPEAL:- 1. THE LD.CIT(APPEALS)-IV AHMEDABAD HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACTION OF THE LD.AO IN HOLDING TH AT THE APPELLANT HAD CONVERTED ITS CAPITAL ASSET BEING THE LAND SITUATED AT SURVEY NO.746 TO 749 OF KARELIBAUG BARODA INTO STOCK IN TRADE SO AS TO ATTRACT THE PROVISIONS OF SEC.45(2). IT(SS)A NO.3/AH D/2006 SWASTIK ENGG.MFG.CO.PVT.LTD. VS.ACIT BLOCK PERIOD : 1.4.1996 TO 2.7.2002 - 2 - IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON C ONSIDERATION OF AGREEMENTS ENTERED INTO AND SURROUNDING FACTS IT BE HELD THAT THE ENTIRE LAND ADMEASURING 104586 SQ.FT. IS TRANSFERRED DURIN G THE YEAR 1994 ITSELF AND NOT AS SALE OF STOCK-IN-TRADE DURING THE PERIOD 1.4.96 TO 2.7.02 TO AN EXTENT OF 40088 SQ.FT. 2. THE LD.CIT(APPEALS) HAS ERRED IN LAW AND IN FAC TS IN HOLDING THAT THE CONSIDERATION RECEIVED BY THE APPELLANT IN RESP ECT OF SALE OF LAND BY ITS CONVERSION INTO STOCK-IN-TRADE IS TO THE TUNE O F RS.105.23 LAKH DURING THE BLOCK PERIOD REQUIRED TO BE TAXED IN ACCORDANCE WITH THE PROVISIONS OF THE LAW. SINCE THE LAND IS SOLD IN THE FINANCIAL YEAR 1993-9 4 ITSELF THE CONSIDERATION IN RESPECT THEREOF ALSO BEEN RECEIVED SUBSTANTIALLY IN ACCORDANCE WITH THE AGREED TERMS PRIOR TO THE BLOC K PERIOD THE SAME COULD NOT BE ALLOCATED AS RECEIVED DURING THE BLOCK PERIOD TOWARDS THE SALE OF STOCK IN TRADE AND THEREFORE THE LD.CIT(A )-IV OUGHT TO HAVE HELD SO. 3. THE LD.CIT(APPEALS) HAS ERRED IN LAW AND IN FAC TS IN CONFIRMING THE ACTION OF THE LD.AO IN COMPUTING AN INCOME OF RS.57 07 529/- AS UNDISCLOSED CAPITAL GAINS EARNED DURING THE BLOCK P ERIOD ON THE TRANSFER OF LAND ON ITS CONVERSION AS STOCK IN TRADE. THE LD.CIT(A) OUGHT TO HAVE HELD THAT THE LAND BEIN G TRANSFERRED IN THE FINANCIAL YEAR 1993-94 ITSELF NO CAPITAL GAINS COU LD HAVE ARISEN TO THE APPELLANT IN ANY SUBSEQUENT PERIOD AND THUS THE AS SESSMENT OF RS.57 07 529/- AS UNDISCLOSED TAXABLE CAPITAL GAIN BE DELETED. 4. THE LD.CIT(APPEALS) HAS ERRED IN LAW AND IN FAC TS IN CONFIRMING THE ACTION OF THE LD.AO IN COMPUTING AN INCOME OF RS.14 63 212/- AS UNDISCLOSED BUSINESS INCOME OF THE APPELLANT EARNED DURING THE BLOCK PERIOD ON THE TRANSFER OF LAND ON ITS CONVERSION AS STOCK IN TRADE. THE LD.CIT(A) OUGHT TO HAVE HELD THAT THE LAND BEIN G TRANSFERRED IN THE FINANCIAL YEAR 1993-94 ITSELF NO BUSINESS INCOME C OULD HAVE ARISEN TO THE APPELLANT IN RESPECT OF THE SAME LAND IN ANY SU BSEQUENT PERIOD AND THUS THE ASSESSMENT OF RS.14 63 212/- AS UNDISCLOS ED BUSINESS PROFIT BE DELETED. IT(SS)A NO.3/AH D/2006 SWASTIK ENGG.MFG.CO.PVT.LTD. VS.ACIT BLOCK PERIOD : 1.4.1996 TO 2.7.2002 - 3 - 5. THE LD.CIT(APPEALS) HAS ERRED IN LAW AND IN FAC TS IN HOLDING THAT AN AMOUNT OF RS.5.00 LAKHS IS RECEIVED BY THE APPELLAN T AS ON MONEY TO BE TAXED AS UNDISCLOSED INCOME. THE TAXATION OF RS.5.00 LAKHS AS UNDISCLOSED INCOME BEING CONTRARY TO LAW AND FACTS IS PRAYED TO BE DELETED. 6. YOUR APPELLANT CRAVES THE LIBERTY TO ADD ALTER AMEND OR DELETE ANY OR ALL THE GROUNDS OF APPEAL STATED ABOVE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT A SEAR CH ACTION U/S.132 WAS CARRIED OUT ON 02/07/2002 COVERING THE RESIDENTIAL AND BUSINESS PREMISES OF RBG GROUP OF CASES. A NOTICE U/S.158BC OF THE A CT WAS ISSUED ON 07/10/2003 REQUIRING THE ASSESSEE TO FILE BLOCK RET URN OF INCOME INCLUDING THE UNDISCLOSED INCOME FOR THE BLOCK PERI OD. IN RESPONSE THERETO THE ASSESSEE FILED RETURN OF INCOME PERTAI NING TO THE BLOCK PERIOD. THE AO FRAMED ASSESSMENT U/S.158BC R.W.S. 158BG OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) VI DE ORDER DATED 31/08/2004 THEREBY THE ASSESSING OFFICER(AO) MADE ADDITION(S) OF RS.71 70 741/- IN RESPECT OF UNDISCLOSED CAPITAL GA IN & BUSINESS INCOME AND OF RS.5 00 000/- IN RESPECT OF UNACCOUNTED INC OME AS ON-MONEY. AGAINST THIS ASSESSEE FILED AN APPEAL BEFORE THE L D.CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS DISMISSED THE APPEAL. 3. GROUND NOS.1 TO 4 ARE INTER-CONNECTED THEREFORE THE SAME ARE TAKEN UP TOGETHER AND ARE DISPOSED OF TOGETHER. TH ESE GROUNDS ARE AGAINST AN ADDITION OF RSE.71 70 741/- BEING UNDISC LOSED CAPITAL GAIN AND BUSINESS INCOME. THE LD.COUNSEL FOR THE ASSESSEE S UBMITTED THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN MAKING THE ADDITION AND IT(SS)A NO.3/AH D/2006 SWASTIK ENGG.MFG.CO.PVT.LTD. VS.ACIT BLOCK PERIOD : 1.4.1996 TO 2.7.2002 - 4 - CONFIRMING THE SAME. SHE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE JUDGEMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA VS. CIT REPORTED AT 2 60 ITR 491(BOM.) 3.1. ON THE CONTRARY LD.CIT-DR SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. HE SUBMITTED THAT ALTHOUGH AN AGREEMENT TO DEVELOP WAS EXECUTED IN THE YEAR 1994 YET THE PROPERTIES WERE T RANSFERRED SUBSEQUENTLY. HE SUBMITTED THAT DEVELOPMENT AGREEM ENT CANNOT BE TERMED AS THE AGREEMENT TO SELL. HE FURTHER SUBMIT TED THAT THE TRANSACTION WAS EFFECTED DURING THE BLOCK PERIOD. 3.2. IN REJOINDER THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT A CONJOINT READING OF SECTION 2(47) OF THE ACT R.W.S. 53A OF THE TRANSFER OF PROPERTY ACT 1882 THE TRANSACTION TOOK PLACE BEY OND THE BLOCK PERIOD. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL THE CASE-LAW CITED BY THE LD.COUNSEL FOR TH E ASSESSEE. WE FIND THAT THE AO HAS OBSERVED AS UNDER :- 4. THE SUBMISSION OF THE ASSESSEE IS CAREFULLY CON SIDERED AND IS NOT FOUND ACCEPTABLE. ON EXAMINATION OF VARIOUS LOOSE-P APERS AND DOCUMENTS FOUND AND SEIZED STATEMENTS OF THE CONNE CTED PERSONS RECORDED U/S.132(4)/131(1A) OF THE ACT AND SUBMISSI ON FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT CLE ARLY PROVES THAT THOUGH THE POSSESSION OF THE LAND WAS HANDED O VER TO THE DEVELOPER THROUGH A DEVELOPMENT AGREEMENT DATED 1/1 0/1994 THE OWNERSHIP OF THE LAND REMAINS WITH THE ASSESSEE . THE OWNERSHIP OF THE LAND IS BEING TRANSFERRED TO THE B UYER BY THE ASSESSEE COMPANY AND THE DEVELOPER M/S.RAJ RISHI AS SOCIATES SIGNS THE CONVEYANCE DEED AS A CONFIRMING PARTY. T HE ASSESSEE COMPANY HAS CONVERTED THE LAND AND BUILDING INTO ST OCK IN TRADE AS ON 31/3/1993 AT A BOOK VALUE OF RS.4 40 425/-. THE ACTS REGARDING CONVERSION OF FIXED ASSETS INTO STOCK IN TRADE IS FURTHER PROVED BY THE RESOLUTION DATED 1/7/1993 WHICH REFER S TO CLEARANCE OF LAND AND AUTHORIZES THE DIRECTORS OF T HE COMPANY IT(SS)A NO.3/AH D/2006 SWASTIK ENGG.MFG.CO.PVT.LTD. VS.ACIT BLOCK PERIOD : 1.4.1996 TO 2.7.2002 - 5 - I.E. SHRI VIKRAM GUPTA AND SHRI BHARAT GUPTA TO NEG OTIATE WITH THE BUYERS IN WHATSOEVER MANNERS BENEFICIAL TO THE COMPANY. IT FURTHER PROVIDES THAT THE AGREEMENT MAY BE ENTERED WITH ONE OR MORE PARTIES BUT THE SELLING PRICE MAY NOT BE LESS THAN RS.250/- PER SQUARE FEET. THIS GESTURE OF THE BOARD OF DIRE CTORS CONFIRMS THAT THE COMPANY HAS DECIDED TO EXPLOIT ITS LAND CO MMERCIALLY. BASED ON THIS RESOLUTION THE ASSESSEE COMPANY ENTE RED INTO A DEVELOPMENT AGREEMENT WITH M/S.RAJ RISHI ASSOCIATES ON 1/10/904 AND THE SAID AGREEMENT IS MADE EFFECTIVE F ROM AUGUST 1993. AS PER THE TERMS OF AGREEMENT THE PRICE PER SQ.FT. IS FIXED AT RS.262.50 AND CONSIDERATION IS TO BE PAID WITHIN 24 MONTHS AND THAT TIME LIMIT MAY BE EXTENDED FURTHER WITH MU TUAL CONSENT AND IN THE SITUATION WHERE THE DEVELOPER DOES NOT G ET PROPER BOOKINGS OF THE FLATS ETC. NORMALLY IN THE CASE OF TRANSFER OF FIXED ASSETS SALES CONSIDERATION IS ALWAYS RECEIVED PRIO R TO DEED OF CONVEYANCE. THIS AGAIN CONFIRMS THAT THE DEAL WAS NOT OF A CAPITAL ASSET BUT A NORMAL BUSINESS TRANSACTION. 4.1. CONSIDERING THE TRANSACTION IN TOTALITY THERE REMA INS NO DOUBTS REGARDING COMMERCIAL VENTURE OF THE ASSESSEE COMPAN Y ACCOMPANIED BY AUDITORS QUALIFYING REMARKS ON NOTE S ON ACCOUNTS FOR 1993 TO 1997 TILL THE TIME OF ASSESSEE COMPANY FILED RETURN OF INCOME. THE TOTAL AMOUNT RECEIVED FROM T HE DEVELOPER HAS BEEN SHOWN BY THE ASSESSEE AS AN ADVANCE RECEIV ED. THE DEVELOPER M/S.RAJ RISHI ASSOCIATES HAS ALSO SHOWN T HE AMOUNT PAID TO THE ASSESSEE COMPANY AS ADVANCE. HOWEVER THE DEVELOPER HAS CREDITED THE ACCOUNT OF THE ASSESSEE COMPANY AS AND WHEN THE POSSESSION OF THE FLAT IS GIVEN AND SA LE DEED IS EXECUTED IN THE FAVOUR OF THE MEMBERS. DURING THE BLOCK PERIOD THE DOCUMENTS HAVE BEEN EXECUTED FOR AN AMOUNT OF R S.105.23 LACS. THE ASSESSEE SHOULD HAVE THEREFORE OFFERED T HE INCOME EARNED THEREON IN ITS RETURN OF INCOME WHICH HAS NO T BEEN DONE AND THE TOTAL AMOUNT IS SHOWN AS AN ADVANCE. THUS THE ASSESSEE HAS EARNED UNDISCLOSED INCOME WHICH REQUIRES TO BE TAXED AS UNDISCLOSED INCOME FOR THE BLOCK PERIOD. 4.2. AS PER THE PROVISIONS OF SECTION 45(2) OF THE ACT PROFIT OR GAIN ARISING FROM THE TRANSFER BY WAY OF CONVERSION BY T HE OWNER OF CAPITAL ASSET INTO OR ITS TREATMENT BY HIM AS STOC K IN TRADE OF BUSINESS CARRIED ON BY HIM SHALL BE CHARGEABLE TO I NCOME-TAX AS HIS INCOME OF THE PREVIOUS YEAR IN WHICH SUCH STOCK IN TRADE IS SOLD OR OTHERWISE TRANSFERRED BY HIM AND FOR THE PU RPOSE OF SECTION 48 THE FAIR MARKET VALUE OF THE ASSET ON T HE DATE OF SUCH CONVERSION OR TREATMENT SHALL BE DEEMED TO BE THE F ULL VALUE OF IT(SS)A NO.3/AH D/2006 SWASTIK ENGG.MFG.CO.PVT.LTD. VS.ACIT BLOCK PERIOD : 1.4.1996 TO 2.7.2002 - 6 - THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET. IN THE INSTANT CASE CAPITAL ASSETS IN THE FORM OF LAND WAS CONVERTED INTO STOCK IN TRA DE AS ON 31/3/1993 AND THE SALE RATE IS FIXED AT RS.262.50/- PER SQ.FT. VIDE THE AGREEMENT REFERRED ABOVE. THE CONVEYANCE DEED FOR SALE OF PARTLY CONSTRUCTED FLAT IS PREPARED AT A PR ICE COMMENSURATE WITH THE TOTAL PRICE TO BE PAID AT THE RATE OF RS.262.50 PER SQ.FT. ACCORDINGLY INCOME EARNED OU T OF THE TRANSACTION S TO BE TAXED IN TWO PORTIONS. THE FIR ST PART SHALL BE A CAPITAL GAIN AND SECOND PART AS BUSINESS INCOME. THE FAIR MARKET VALUE OF THE PROPERTY IS TO BE DETERMINED AS ON 31/3/1993. SINCE THE AGREEMENT OF DEVELOPMENT IS D ATED 1/10/94 DEEMED TO BE EFFECTIVE FROM 1/8/1993 13 M ONTHS PRIOR TO ACTUAL HANDLING OVER THE POSSESSION FAIR MARKET VALUE AS ON THE DATE OF TRANSFER WORKS OUT TO RS.226 PER SQ.FT. (COST INFLATION INDEX IN THE YEAR F.Y. 94-95 WAS 259 AND F.Y. 92-93 WAS 223. THEREFORE FAIR MARKET VALUE AS ON 31.3.93 IS ADJUST ED AS 223 X 262.50 / 259 = 226). THE VALUE OF THE LAND IN QUES TION AS ON 1.4.1981 IS TAKEN AT RS.37.50 PER SQ.FT. ON THE BAS IS OF THE VALUE ADOPTED FOR THE TRANSACTION WITH M/S.LOK PRAKASAN L IMITED IN RESPECT OF PART OF LAND SOLD TO THEM IN FINANCIAL E YAR 1992-93 AS PER THE INFORMATION AVAILABLE ON CASE RECORDS OF TH E ASSESSEE. THE INDEXED COST OF ACQUISITION COMES TO RS.83.62 P ER SQ.FT. IN VIEW OF THE ABOVE THE UNDISCLOSED INCOME OF THE AS SESSEE WORKS OUT AS UNDER:- COMPUTATION OF CAPITAL GAIN U/S.45(2) AREA OF LAND SOLD IN BLOCK PERIOD 40088 SQ.FT. (A) FAIR MARKET VALUE AS ON 31.3.93 DEED EXECUTED WITH THE BUYERS RS.90 59 88 8=00 (40088 X RS.226 PER SQ.FT.) (B) LESS : INDEXED COST OF ACQUISITION OF LAND PROPORTIONATE OF ABOVE SALE RS.33 52 359=00 (40 088 * 83.62) (C) UNDISCLOSED TAXABLE CAPITAL GAIN RS.57 07 529 =00 COMPUTATION OF BUSINESS PROFIT (A) SALE PROCEEDS (40088 X 262.50) RS.1 05 23 100 =00 LESS : FAIR MARKET VALUE (40088 X 226) RS. 90 59 888=00 RS.14 63 212=00 ACCORDINGLY RS.71 70 740/- IS TREATED AS UNDISCLO SED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD AND ADDED TO THE TOTA L UNDISCLOSED INCOME IT(SS)A NO.3/AH D/2006 SWASTIK ENGG.MFG.CO.PVT.LTD. VS.ACIT BLOCK PERIOD : 1.4.1996 TO 2.7.2002 - 7 - AS PER THE RETURN OF INCOME FOR BLOCK ASSESSMENT. PENALTY PROCEEDINGS U/S.158 BFA (2) OF THE ACT IS SEPARATELY INITIATED FOR CONCEALMENT OF UNDISCLOSED INCOME IN THE BLOCK RETURN OF INCOME. 4.1. WE ALSO FIND THAT THE LD.CIT(A) AFTER CONSIDER ING THE SUBMISSIONS OF THE ASSESSEE HAS HELD AS UNDER:- 3.5. THE SUBMISSION OF THE APPELLANT IS DULY CONSI DERED AND I DO NOT FIND SUBSTANCE IN IT. THE FACTS OF THE CASE N ATURE OF AGREEMENT ENTERED INTO WITH M/S.RAJ RISHI ASSOCIATES CLEARLY SUGGEST THAT IT IS NOT A SALE AGREEMENT. DURING THE PERIOD UNDER CONS IDERATION THE APPELLANT HAS ENTERED INTO TWO TYPES OF AGREEMENT I .E. ONE IS WITH LOK PRAKASHAN LTD. WHICH IS CLEARLY A SALE AGREEME NT WHEREAS THE AGREEMENT WITH M/S.RAJ RISHI ASSOCIATES IS A D EVELOPMENT AGREEMENT WHEREIN THE APPELLANT HAS RETAINED OWNER SHIP WITH HIMSELF WHICH IS PROVED BY THE FACT THAT WHEN THE PROPERTY IS BEING TRANSFERRED TO THE MEMBERS I.E. ULTIMATE BUYERS TH E APPELLANT IS SIGNING THE DOCUMENTS AND M/S.RAJ RISHI ASSOCIATES IS SIGNING AS CONFIRMING PARTY. THIS ARRANGEMENT ITSELF PROVES T HAT THE LAD IN QUESTION HAS NOT BEEN SOLD TO M/S.RAJ RISHI ASSOCIA TES. THIS FACT HAS BEEN RECOGNIZED BY THE AUDITORS OF THE APPELLAN T COMPANY. THE APPELLANT HAS RAISED VARIOUS ARGUMENTS WHICH A RE MAINLY HYPOTHETICAL. THE ARGUMENT THAT THE TRANSACTION OF SALE OF LAND TO M/S.RAJ RISHI ASSOCIATES IS COMPLETE IN 1994-95 CAN NOT BE ACCEPTED FOR THE REASON THAT IT HAS BEEN ESTABLISHE D BY THE A.O. THAT THE PRESENT TRANSACTION IS NOT A SALE OF LAND TO M/S.RAJ RISHI ASSOCIATES SO THE ARGUMENT OF THE APPELLANT FAILS WHICH IS FURTHER PROVED BY THE TREATMENT BOTH THE CONCERNS HAVE BEEN GIVEN IN THEIR BOOKS OF ACCOUNTS. IN THE FACTS AND CIRCUMSTANCES OF THE CASE I DO NOT SEE ANY INFIRMITY IN THE STAND OF THE A.O. THE ADDITION OF RS.71 70 741/- IS THUS CONFIRMED. 4.2. FROM THE ABOVE FINDINGS THE OBJECTION OF THE AUTHORITIES IS THAT THE TRANSACTION IS NOT A SALE OF LAND TO M/S.RAJ RISHI ASSOCIATES. DURING THE COURSE OF HEARING LD.COUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO IT(SS)A NO.3/AH D/2006 SWASTIK ENGG.MFG.CO.PVT.LTD. VS.ACIT BLOCK PERIOD : 1.4.1996 TO 2.7.2002 - 8 - VARIOUS CLAUSES OF THE DEVELOPMENT AGREEMENT. CLAU SE NOS.(1) (2) & 3 THAT ARE REPRODUCED HEREINBELOW:- (1) IN REGISTRATION DISTRICT AND SUB DISTRICT VADO DARA IN THE CITY OF VADODRA IN THE AREA OF BAHUCHARAJI ROAD K ARELIBAUG LANDS BEARING CITY TIKKA NO.5075 5076 5077 5078 5079 PART AND BEARING SURVEY NOS.746 747 748 749 PART ARE LOCA TED WHICH TERM LAND SHALL BE KNOWN AND REFERRED TO IN THIS A GREEMENT AS THE LAND INVOLVED IN THIS AGREEMENT. THE SAID LAND PRO PERTY WHICH IS SITUATED TOWARDS SIDE OF THE EAST-WEST ROAD IS ADME ASURING 83375 SO FEET AND FOR THE DEVELOPMENT OF THE SAID LAND T HIS DEVELOPMENT AGREEMENT IS EXECUTED. IT IS FURTHER SPECIFIED THA T THIS AGREEMENT IS EXECUTED IN RESPECT OF THE LAND SITUATED ON THE NORTHERN SIDE OF THE MIDDLE OF EAST-WEST ROAD TILL ITS BOUNDARY. T HAT AT THE TIME OF CALCULATING THE AREA AND MEASUREMENT OF THIS LAND THE ENCROACHMENTS MADE ON THIS LAND AND IF THIS ENCROAC HMENT IS NOT REMOVED OR RELEASED. IN THESE CIRCUMSTANCES THE A REA OF ENCROACHMENT SHALL BE DEDUCTED FROM THE AREA MEASUR ED FROM THIS LAND AND THE REMAINING BALANCE SQUARE FEET LAND SHA LL BE THE SUBJECT MATTER OF THIS AGREEMENT GIVEN FOR DEVELOPM ENT TO THE PARTY OF THE SECOND PART. FOR FURTHER CLARIFICATION THE SAME IS SHOWN IN THE MAP WITH RED COLOUR AND THIS MAP SHALL FORM PAR T OF THIS AGREEMENT. (2) THAT THE PARTY OF THE SECOND PART HAVE KEPT TH E LAND WHICH IS ADMEASURING ABOUT 83375 SQ.FEET STATED IN PARA 1 AB OVE FOR DEVELOPMENT FIXING ITS VALUE AT THE RATE OF RS.262 -50 P. PER SQ.FOOT (RUPEES TWO HUNDRED SIXTY TWO AND FIFTY PAISE). IT HAS BEEN DECIDED TO PAY THE AMOUNT OF CONSIDERATION BY THE P ARTY OF THE SECOND PART TO THE PARTY OF THE FIRST PART AS DETAI LED BELOW: (A) THAT THE PARTY OF THE SECOND PART SHALL PAY T O THE PARTY OF THE FIRST PART THE CONSIDERATION OF THE TOTAL LAND DESCRIBED IN PARA 1 ABOVE AT THE RATE OF RS.262-50 P. PER SQ.FO OT. (B) THAT THE TIME LIMIT IN RESPECT OF THE PROPERT Y STATED IN PARA 1 OF THIS DEVELOPMENT AGREEMENT SHALL BE CONSIDERED F ROM 1-8- IT(SS)A NO.3/AH D/2006 SWASTIK ENGG.MFG.CO.PVT.LTD. VS.ACIT BLOCK PERIOD : 1.4.1996 TO 2.7.2002 - 9 - 93 AND THE PARTY OF THE SECOND PART SHALL HAVE TO P AY TO THE PARTY OF FIRST PART THE AMOUNT OF CONSIDERATION WI THIN 2 YEARS AND 6 MONTHS FROM 1-8-93 AND WITH THIS SPECIF IC CONDITION THIS AGREEMENT IS EXECUTED. (C) THAT THE PARTY OF THE SECOND PART HAVE PAID T O THE PARTY OF THE FIRST PART A SUM OF RS.1 00 001/- (IN WORDS RUP EES ONE LAC ONE ONLY) TOWARDS THE CONSIDERATION AMOUNT FOR THE PROPERTY STATED IN PARA 1 ABOVE AND HAVE EXECUTED T HIS AGREEMENT THEREUPON. (D) THAT THE PARTY OF THE SECOND PART HAVE PAID A SUM O F RS.1 00 001/- IN WORDS (RUPEES ONE LAC ONE ONLY) TO WARDS THE CONSIDERATION AMOUNT OF THE PROPERTY STATED IN PARA 1 ABOVE WHICH ARE RECEIVED BY THE PARTY OR THE FIRST PART A ND THE REMAINING AMOUNT OF CONSIDERATION SHALL BE PAID BY EQUAL INSTALMENTS OF THE INTERVAL GAP OF 3 MONTHS WITHIN THE STIPULATED PERIOD FROM THE DATE OF THIS AGREEMENT. IT IS CLARIFIED THAT THE PERIOD O YEARS AND 6 MONTHS SHAL L BE COMPUTED FROM 1-8-93 AND THE RATE PER SQ FOOT IS FI XED AT RS.262-50 AND THE AREA OF 83375 SQ FEET IS ALSO DEC IDED BETWEEN THE PARTIES MUTUALLY. SO THE TOTAL AMOUNT OF CONSIDERATION SHALL BE PAID BY THREE MONTHLY INSTAL MENTS EQUALLY PARTING THE WHOLE AMOUNT AND ACCORDINGLY TH E FULL AMOUNT OF CONSIDERATION SHALL BE PAID WITHIN 2 YEAR S 6 MONTHS FROM 1-8-93. (E) I THIS AGREEMENT THE PARTIES MAKE IT CLEAR THAT TH E ACTUAL PHYSICAL POSSESSION OF THE LAND SHOWN IN PARA 1 ABO VE IS HANDED OVER TO THE PARTY OF SECOND PART FOR DEVELOP MENT ON 1- 8-93 AND FOR WHICH THE CONSIDERATION AMOUNT AT THE RATE OF RS.262-50 PER SQ.FOOT SHALL BE PAID WITHIN 2 YEARS 6 MONTHS FROM THE DATE OF POSSESSION THAT IS 1-8-93. THAT T HE PARTY OF THE SECOND PART HAVE GIVEN ASSURANCE TO THE PARTY O F THE FIRST PART FOR OBEYING THIS TIME LIMIT FOR MAKING PAYMEN T IN ORDINARY COURSE. HOWEVER IF THERE ARE CIRCUMSTANC ES AND REASONS BEYOND THE CONTROL OF THE PARTY OF SECOND P ART AND IN SPITE OF ALL THE ATTEMPTS MADE BY HIM IF MEMBERS A RE NOT REGISTERED AND CONSTRUCTION WORK IS NOT COMPLETED IN SUCH CIRCUMSTANCES THE SAID PERIOD OF 2 YEARS AND 6 MON THS SHALL IT(SS)A NO.3/AH D/2006 SWASTIK ENGG.MFG.CO.PVT.LTD. VS.ACIT BLOCK PERIOD : 1.4.1996 TO 2.7.2002 - 10 - BE EXTENDED FOR FURTHER 6 MONTHS BUT IN THAT CASE THE AMOUNT OF SALE CONSIDERATION SHOULD NOT BE MORE THAN RS.50 00 000/- FIFTY LACS DUE TO BE PAID AND WITH THIS SPECIFIC UN DERSTANDING THIS AGREEMENT IS MADE. (3) THAT THE TIME LIMIT STIPULATED FOR 2 YEARS AND 6 MONTHS IN RESPECT OF THE PROPERTY SHOWN IN PARA 1 ABOVE MAY BE EXTENDED ONLY FOR THE PERIOD OF SIX MONTHS AND WITHIN THAT T IME THE PARTY OF THE SECOND PART SHALL HAVE TO PAY ALL THE MONEY OF CONSIDERATION FULLY AND POSITIVELY AND ON WHATEVER AMOUNTS REMAIN ING TO BE PAID WITHIN THE SAID PERIOD 6 MONTHS AS THERE IS DELAY IN MAKING PAYMENT OF MONEY WITHIN STIPULATED PERIOD IN THAT CASE THE PARTY OF THE FIRST PART SHALL BE ENTITLED TO INTEREST AMO UNT AT THE RATE OF 18 PER CENT PER ANNUM AS DAMAGES FOR THAT PERIOD OF 6 MONTHS OR THE MONEY WITHIN THE PERIOD OF 6 MONTHS AND SUCH INTERE ST AMOUNT SHALL BE PAID BY THE PARTY OF THE SECOND PART TO TH E PARTY OF THE FIRST PART FOR DELAYED PAYMENTS MADE WITHIN EXTENDED PERI OD OF 6 MONTHS. IT IS HERE CLARIFIED THAT FIRSTLY THE TIME LIMIT OF 2 YEARS AND 6 MONTHS WAS DECIDED/FIXED FOR PAYMENT OF THE AMOUN T OF CONSIDERATION AND IN CASE OF FAILURE TO MAKE PAYME NT WITHIN THE SAID STIPULATED PERIOD IN THAT CASE WHATEVER AMOU NTS REMAINED DUE TO BE PAID AFTER THAT STIPULATED PERIOD AND PAI D DURING THE SAID EXTENDED PERIOD OF SIX MONTHS THEN THE PARTY OF THE SECOND PART SHALL PAY INTEREST AT THE RATE OF 18 PER CENT PER A NNUM TRO THE PARTY OF THE FIRST PART ON SUCH DELAYED PAYMENTS AS DAMAG ES. 4.3. FROM A BARE READING OF THE ABOVEMENTIONED CLAU SES IT IS EVIDENT THAT THE DEVELOPMENT AGREEMENT IS IN FACT A SORT OF AGREEMENT TO SELL. 4.4. THE LD.COUNSEL FOR THE ASSESSEE HAS RELIED ON THE JUDGEMENT OF THE BOMBAY HIGH COURT RENDERED IN THE CASE OF CHATURBHU J DWARKADAS KAPADIA VS. CIT(SUPRA). WE FIND THAT UNDER THE IDE NTICAL FACTS THE HONBLE HIGH COURT HAS LAID THE FOLLOWING PRINCIPLE S. SCOPE OF S. 2(47) (V) IT(SS)A NO.3/AH D/2006 SWASTIK ENGG.MFG.CO.PVT.LTD. VS.ACIT BLOCK PERIOD : 1.4.1996 TO 2.7.2002 - 11 - 5. CLAUSES (V) AND (VI) OF S. 2(47) READS AS UNDER: SEC. 2(47)..................... (V) (W.E.F. 1ST APRIL 1988) ANY TRANSACTION INVOLV ING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY (AS DEFINED) T O BE TAKEN OR RETAINED IN PART-PERFORMANCE OF A CONTRACT OF THE NATURE REFERR ED TO IN S. 53A OF THE TRANSFER OF PROPERTY ACT 1882 (4 OF 1882); OR (VI) (W.E.F. 1ST APRIL 1988) ANY TRANSACTION (WHET HER BY BECOMING A MEMBER OF OR ACQUIRING SHARES IN A CO-OPERATIVE SOCIETY COM PANY OR OTHER AOP OR BY WAY OF ANY AGREEMENT OR ANY ARRANGEMENT OR IN ANY O THER MANNER WHATSOEVER) WHICH HAS THE EFFECT OF TRANSFERRING OR ENABLING T HE ENJOYMENT OF ANY IMMOVABLE PROPERTY (AS DEFINED).' THE ABOVE TWO CLAUSES WERE INTRODUCED W.E.F. 1ST AP RIL 1988. THEY PROVIDE THAT 'TRANSFER' INCLUDES (I) ANY TRANSACTION WHICH ALLOWS POSSESSION TO BE TAKEN/RETAINED IN PART-PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN S. 53A OF THE TRANSFER OF PROPERTY ACT AND (II) ANY T RANSACTION ENTERED INTO IN ANY MANNER WHICH HAS THE EFFECT OF TRANSFERRING OR ENABLING THE ENJOYMENT OF ANY IMMOVABLE PROPERTY [SEE S. 269UA(D)]. THEREFORE IN THESE TWO CASES CAPITAL GAINS WOULD BE TAXABLE IN THE YEAR IN WHICH SUCH TRANSACTIONS ARE ENTERED INTO EVEN IF THE TRANSFER OF IMMOVABLE PRO PERTY IS NOT EFFECTIVE OR COMPLETE UNDER THE GENERAL LAW (SEE KANGA & PALKHIV ALA S LAW & PRACTICE OF INCOME-TAX-VIII EDITION P. 766). THIS TEST IS IMPO RTANT TO DECIDE THE YEAR OF CHARGEABILITY OF THE CAPITAL GAINS. FINDINGS 6. AT THE OUTSET WE MAY POINT OUT THAT IN THIS CASE THE ASSESSEE DOES NOT DENY TRANSFER. THE ONLY DISPUTE IN THIS CASE IS WHETHER THE TRANSFER TOOK PLACE DURING THE ACCOUNTING YEAR ENDING 31ST MARCH 1996 OR WHETHER IT TOOK PLACE DURING THE ACCOUNTING YEAR ENDING 31ST MARCH 1999. IN OTHER WORDS THE DISPUTE IS CONFINED TO THE YEAR OF CHARGEABILITY. UNDER S. 2(47)(V) ANY TRANSACTION INVOLVING ALLOWI NG OF POSSESSION TO BE TAKEN OVER OR RETAINED IN PART-PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN S. 53A OF THE TRANSFER OF PROPERTY ACT WOULD COME W ITHIN THE AMBIT OF S. 2(47)(V). THAT IN ORDER TO ATTRACT S. 53A THE FOL LOWING CONDITIONS NEED TO BE FULFILLED. THERE SHOULD BE A CONTRACT FOR CONSIDERA TION; IT SHOULD BE IN WRITING; IT SHOULD BE SIGNED BY THE TRANSFEROR; IT SHOULD PE RTAIN TO TRANSFER OF IMMOVABLE PROPERTY; THE TRANSFEREE SHOULD HAVE TAKEN POSSESSI ON OF THE PROPERTY; LASTLY IT(SS)A NO.3/AH D/2006 SWASTIK ENGG.MFG.CO.PVT.LTD. VS.ACIT BLOCK PERIOD : 1.4.1996 TO 2.7.2002 - 12 - THE TRANSFEREE SHOULD BE READY AND WILLING TO PERFO RM HIS PART OF THE CONTRACT. THAT EVEN ARRANGEMENTS CONFERRING PRIVILEGES OF OWN ERSHIP WITHOUT TRANSFER OF TITLE COULD FALL UNDER S. 2(47)(V). SEC. 2(47)(V) W AS INTRODUCED IN THE ACT FROM ASST. YR. 1988-89 BECAUSE PRIOR THERETO IN MOST CA SES IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT NO TRANSFER TOOK PLACE TILL EX ECUTION OF THE CONVEYANCE. CONSEQUENTLY ASSESSEES USED TO ENTER INTO AGREEMEN TS FOR DEVELOPING PROPERTIES WITH THE BUILDERS AND UNDER THE ARRANGEM ENT WITH THE BUILDERS THEY USED TO CONFER PRIVILEGES OF OWNERSHIP WITHOUT EXEC UTING CONVEYANCE AND TO PLUG THAT LOOPHOLE S. 2(47)(V) CAME TO BE INTRODUC ED IN THE ACT. IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT THERE WAS NO EFFECTIVE TRANSFER TILL GRANT OF IRREVOCABLE LICENCE. IN THIS CONNECTION J UDGMENTS OF THE SUPREME COURT WERE CITED ON BEHALF OF THE ASSESSEE BUT ALL THOSE JUDGMENTS WERE PRIOR TO INTRODUCTION OF THE CONCEPT OF DEEMED TRANSFER U NDER S. 2(47)(V). IN THIS MATTER AGREEMENT IN QUESTION IS A DEVELOPMENT AGRE EMENT. SUCH DEVELOPMENT AGREEMENTS DO NOT CONSTITUTE TRANSFER IN GENERAL LA W. THEY ARE SPREAD OVER A PERIOD OF TIME. THEY CONTEMPLATE VARIOUS STAGES. TH E BOMBAY HIGH COURT IN VARIOUS JUDGMENTS HAS TAKEN THE VIEW IN SEVERAL MAT TERS THAT THE OBJECT OF ENTERING INTO A DEVELOPMENT AGREEMENT IS TO ENABLE A PROFESSIONAL BUILDER/CONTRACTOR TO MAKE PROFITS BY COMPLETING TH E BUILDING AND SELLING THE FLATS AT A PROFIT. THAT THE AIM OF THESE PROFESSION AL CONTRACTORS WAS ONLY TO MAKE PROFITS BY COMPLETING THE BUILDING AND THEREF ORE NO INTEREST IN THE LAND STANDS CREATED IN THEIR FAVOUR UNDER SUCH AGREEMENT S. THAT SUCH AGREEMENTS ARE ONLY A MODE OF REMUNERATIN G THE BUILDER FOR HIS SERVICES OF CONSTRUCTING THE BUILDING [SEE GURUDEV DEVELOPERS VS. KURLA KONKAN NIWAS CO.OPERATIVE HOUSING SOCIETY (2000) 3 MAHARASHTRA LAW JOURNAL 131] IT IS PRECISELY FOR THIS REASON THAT THE LEGISLATURE HAS INTRODUCED S. 2(47)(V) R/W S. 45 WHICH INDICATES THAT CAPITAL GAINS IS TAXABLE IN THE YEAR IN WHICH SUCH TRANSACTIONS ARE ENTERED INTO EVEN IF TH E TRANSFER OF IMMOVABLE PROPERTY IS NOT EFFECTIVE OR COMPLETE UNDER THE GEN ERAL LAW. IN THIS CASE THAT TEST HAS NOT BEEN APPLIED BY THE DEPARTMENT. NO REA SON HAS BEEN GIVEN WHY THAT TEST HAS NOT BEEN APPLIED PARTICULARLY WHEN T HE AGREEMENT IN QUESTION READ AS A WHOLE SHOWS THAT IT IS A DEVELOPMENT AGR EEMENT. THERE IS A DIFFERENCE BETWEEN CONTRACT ON ONE HAND AND PERFORM ANCE ON THE OTHER HAND. IN THIS CASE THE TRIBUNAL AS WELL AS THE DEPARTMEN T HAVE COME TO THE CONCLUSION THAT THE TRANSFER TOOK PLACE DURING THE ACCOUNTING YEAR ENDING 31ST MARCH 1996 AS SUBSTANTIAL PAYMENTS WERE EFFECTED DURING THAT YEAR AND SUBSTANTIAL PERMISSIONS WERE OBTAINED. IN SUCH CASE S OF DEVELOPMENT AGREEMENTS ONE CANNOT GO BY SUBSTANTIAL PERFORMANC E OF A CONTRACT. IN SUCH CASES THE YEAR OF CHARGEABILITY IS THE YEAR IN WHI CH THE CONTRACT IS EXECUTED. THIS IS IN VIEW OF S. 2(47)(V) OF THE ACT. IT(SS)A NO.3/AH D/2006 SWASTIK ENGG.MFG.CO.PVT.LTD. VS.ACIT BLOCK PERIOD : 1.4.1996 TO 2.7.2002 - 13 - BEFORE US IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT THE DATE ON WHICH POSSESSION IS PARTED WITH BY THE TRANSFEROR IS THE DATE WHICH SHOULD BE TAKEN INTO ACCOUNT FOR DETERMINING THE RELEVANT ACCOUNTIN G YEAR IN WHICH THE LIABILITY ACCRUES. IT WAS ARGUED ON BEHALF OF THE ASSESSEE TH AT IN THIS CASE IRREVOCABLE LICENCE WAS GIVEN IN TERMS OF THE CONTRACT ONLY DUR ING THE FINANCIAL YEAR ENDING 3LST MARCH 1999 AND THEREFORE THERE WAS NO TRAN SFER DURING THE FINANCIAL YEAR ENDING 31ST MARCH 1996. ON THE OTHER HAND IT WAS ARGUED ON BEHALF OF THE REVENUE THAT ONE HAS TO GO BY THE DATE ON WHICH THE DEVELOPER SUBSTANTIALLY PERFORMED THE CONTRACT. IT WAS ARGUED ON BEHALF OF THE DEPARTMENT THAT SINCE SUBSTANTIAL PAYMENTS WERE MAD E DURING THE FINANCIAL YEAR ENDING 31ST MARCH 1996 AND SINCE MAJORITY OF PERMISSIONS WERE OBTAINED DURING THAT YEAR THE LIABILITY TO PAY CAP ITAL GAINS TAX ACCRUED DURING ASST. YR. 1996-97. IN THIS CASE THE AGREEMENT IS A DEVELOPMENT AGREEMENT AND IN OUR VIEW THE TEST TO BE APPLIED TO DECIDE THE Y EAR OF CHARGEABILITY IS THE YEAR IN WHICH THE TRANSACTION WAS ENTERED INTO. WE HAVE TAKEN THIS VIEW FOR THE REASON THAT DEVELOPMENT AGREEMENT DOES NOT TRANSFER THE INTEREST IN THE PROPERTY TO THE DEVELOPER IN GENERAL LAW AND THERE FORE S. 2(47)(V) HAS BEEN ENACTED AND IN SUCH CASES EVEN ENTERING INTO SUCH A CONTRACT COULD AMOUNT TO TRANSFER FROM THE DATE OF THE AGREEMENT ITSELF. WE HAVE TAKEN THIS VIEW FOR A PRECISE REASON. FIRSTLY WE FIND IN NUMEROUS MATTER S WHERE THE AO AND THE DEPARTMENT GENERALLY PROCEED ON THE BASIS OF SUBSTA NTIAL COMPLIANCE OF THE CONTRACT. FOR EXAMPLE IN THIS VERY CASE THE DEPAR TMENT HAS CONTENDED THAT BECAUSE OF SUBSTANTIAL COMPLIANCE OF THE CONTRACT D URING THE FINANCIAL YEAR ENDING 31ST MARCH 1996 THE TRANSFER IS DEEMED TO HAVE TAKEN PLACE IN THAT YEAR. SUCH INTERPRETATION WOULD RESULT IN ANOMALY B ECAUSE WHAT IS SUBSTANTIAL COMPLIANCE WOULD DIFFER FROM OFFICER TO OFFICER. TH EREFORE IF ON A BARE READING OF A CONTRACT IN ITS ENTIRETY AN AO COMES TO THE C ONCLUSION THAT IN THE GUISE OF AGREEMENT FOR SALE A DEVELOPMENT AGREEMENT IS CONT EMPLATED UNDER WHICH THE DEVELOPER APPLIES FOR PERMISSIONS FROM VARIOUS AUTH ORITIES EITHER UNDER POWER OF ATTORNEY OR OTHERWISE AND IN THE NAME OF THE ASS ESSEE THEN THE AO IS ENTITLED TO TAKE THE DATE OF THE CONTRACT AS THE DA TE OF TRANSFER IN VIEW OF S. 2(47)(V). IN THIS VERY CASE THE DATE ON WHICH THE DEVELOPER OBTAINED A COMMENCEMENT CERTIFICATE IS NOT WITHIN THE ACCOUNTI NG YEAR ENDING 31ST MARCH 1996. AT THE SAME TIME IF ONE READS THE CON TRACT AS A WHOLE IT IS CLEAR THAT A DICHOTOMY IS CONTEMPLATED BETWEEN LIMITED PO WER OF ATTORNEY AUTHORISING THE DEVELOPER TO DEAL WITH THE PROPERTY VIDE PARA 8 AND AN IRREVOCABLE LICENCE TO ENTER UPON THE PROPERTY AFTE R THE DEVELOPER OBTAINS THE REQUISITE APPROVALS OF VARIOUS AUTHORITIES. IN FACT THE LIMITED POWER OF ATTORNEY MAY NOT BE ACTUALLY GIVEN BUT ONCE UNDER CL. 8 OF THE AGREEMENT A LIMITED POWER OF ATTORNEY IS INTENDED TO BE GIVEN TO THE DE VELOPER TO DEAL WITH THE PROPERTY THEN WE ARE OF THE VIEW THAT THE DATE OF THE CONTRACT VIZ. 18TH AUG. 1994 WOULD BE THE RELEVANT DATE TO DECIDE THE DATE OF TRANSFER UNDER S. IT(SS)A NO.3/AH D/2006 SWASTIK ENGG.MFG.CO.PVT.LTD. VS.ACIT BLOCK PERIOD : 1.4.1996 TO 2.7.2002 - 14 - 2(47)(V) AND IN WHICH EVENT THE QUESTION OF SUBST ANTIAL PERFORMANCE OF THE CONTRACT THEREAFTER DOES NOT ARISE. THIS POINT HAS NOT BEEN CONSIDERED BY ANY OF THE AUTHORITIES BELOW. NO JUDGMENT HAS BEEN SHOWN T O US ON THIS POINT. THEREFORE ALTHOUGH THERE IS A CONCURRENT FINDING O F FACT IN THIS CASE WE HAVE ENUNCIATED THE PRINCIPLES FOR APPLICABILITY OF S. 2 (47)(V). WE DO NOT FIND MERIT IN THE ARGUMENT OF THE ASSESSEE THAT THE COURT SHOU LD GO ONLY BY THE DATE OF ACTUAL POSSESSION AND THAT IN THIS PARTICULAR CASE THE COURT SHOULD GO BY THE DATE ON WHICH IRREVOCABLE LICENCE WAS GIVEN. IF THE CONTRACT READ AS A WHOLE INDICATES PASSING OF OR TRANSFERRING OF COMPLETE CO NTROL OVER THE PROPERTY IN FAVOUR OF THE DEVELOPER THEN THE DATE OF THE CONTR ACT WOULD BE RELEVANT TO DECIDE THE YEAR OF CHARGEABILITY. 4.5. IN THE LIGHT OF THE ABOVE PRINCIPLES LAID DOWN BY THE HONBLE BOMBAY HIGH COURT WE ARE OF THE CONSIDERED VIEW T HAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED FOR MAKING ADDITION THERE FORE RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT WE HEREBY DIRECT THE AO TO DELETE THE ADDITION AND HOL D THAT SINCE THE DEVELOPMENT AGREEMENT WAS EXECUTED IN THE YEAR 1994 I.E. BEYOND THE BLOCK PERIOD THEREFORE THE TRANSACTION TOOK PLACE IN THE YEAR OF EXECUTION OF THE AGREEMENT. THUS GROUND NOS.1 TO 4 ARE ALLO WED. 5. GROUND NO.5 HAS NOT BEEN PRESSED BY THE LD.COUNS EL FOR THE ASSESSEE AND THEREFORE THE SAME IS DISMISSED AS N OT PRESSED. 6. GROUND NO.6 IS GENERAL IN NATURE REQUIRES NO IND EPENDENT ADJUDICATION. 7. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( ) ( %) !' # # ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 04/ 04 /2014 IT(SS)A NO.3/AH D/2006 SWASTIK ENGG.MFG.CO.PVT.LTD. VS.ACIT BLOCK PERIOD : 1.4.1996 TO 2.7.2002 - 15 - 7 .. .../ T.C. NAIR SR. PS !4 / 8 9!83 !4 / 8 9!83 !4 / 8 9!83 !4 / 8 9!83/ COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. -(+ / THE RESPONDENT. 3. $$ : / CONCERNED CIT 4. :() / THE CIT(A)-IV AHMEDABAD 5. 8%; / DR ITAT AHMEDABAD 6. ;<= >0 / GUARD FILE. !4 !4 !4 !4 / BY ORDER -8 //TRUE COPY// ? ?? ?/ // / $) $) $) $) ( DY./ASSTT.REGISTRAR) / ITAT AHMEDABAD 1. DATE OF DICTATION ..1.4.14(DICTATION-PAD 10-PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 2.4.14 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH FAIR ORDER PLACED BEFOR E OTHER MEMBER 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.4.4.14 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 4.4.14 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER