Income Tax Appellate Tribunal - Pune
Asst. Cit, Circle-2, Pune vs Shri Rajendra Sitaram Goel, Pune on 9 January, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
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BEFORE SHRI R.K. PANDA, AM
AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA No.1310/PUN/2013
#नधा&रण वष& / Assessment Year : 2009-10
Shri Rajendra S. Goel, .......... अपीलाथ /Appellant
San Mahu Commercial Complex,
5, Bund Garden Road,
Opposite Poona Club,
Pune - 411001
PAN : AAWPG 2105J
बनाम v/s
Addl.CIT, Range-2, Pune .......... यथ /Respondent
आयकर अपील सं. / ITA No.1485/PUN/2013
#नधा&रण वष& / Assessment Year : 2009-10
Addl.CIT, Range-2, Pune .......... अपीलाथ /Appellant
बनाम v/s
Shri Rajendra S. Goel, .......... यथ /Respondent
San Mahu Commercial Complex,
5, Bund Garden Road,
Opposite Poona Club,
Pune - 411001
PAN : AAWPG 2105J
आयकर अपील सं. / ITA No.748/PUN/2013
#नधा&रण वष& / Assessment Year : 2009-10
Deepak Laxman Kudale, .......... अपीलाथ /Appellant
6, Sahajeevan Society,
Bhosale Nagar, Aundh,
Pune - 411007
PAN : ABFPK3541C
बनाम v/s
Jt. CIT, Range-4, Pune .......... यथ /Respondent
2
ITA No.1310, 1485,748, 749 & 933 /PUN/2013
आयकर अपील सं. / ITA No.749/PUN/2013
#नधा&रण वष& / Assessment Year : 2009-10
Neeraj Horticulturists Pvt. Ltd., .......... अपीलाथ /Appellant
Flat No.5, Vijaya Laxman Building,
Parvati Darshan Society,
Off. Sinhagad Road,
Pune - 411 030
PAN :AAACN6323L
बनाम v/s
JCIT, Range-4, Pune .......... यथ /Respondent
आयकर अपील सं. / ITA No.933/PUN/2013
#नधा&रण वष& / Assessment Year : 2009-10
Nupoora Developers Pvt. Ltd., .......... अपीलाथ /Appellant
C/o. Deepak Group, Flat No.5,
Vijaya Laxman Building,
Off. Sinhagad Road,
Parvati Darshan Co.op Society,
Pune - 411 030
PAN : AAACN6322M
बनाम v/s
ACIT, Range-2, Pune .......... यथ /Respondent
अपीलाथ क ओर से / Appellant by : Shri Sunil Pathak &
Shri Vipin Gujrathi
यथ क ओर से / Respondent by : Shri T. Vijaya B. Reddy
सुनवाई क तार ख / घोषणा क तार ख /
Date of Hearing :09.11.2016 Date of Pronouncement: 09.01.2017
आदे श / ORDER
PER R.K.PANDA, AM :
ITA No.1310/PUN/2013 filed by the assessee and ITA
No.1485/PUN/2013 filed by the revenue are cross appeals and are directed against the order dated 28-02-2013 of the CIT(A)-II, Pune relating to Assessment Year 2009-10. ITA Nos. 748/PUN/2013 and 749/PUN/2013 filed by the respective assessees are directed against the separate orders 3 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 dated 09-11-2012 of the CIT(A)-II, Pune relating to Assessment Year 2009-
10. ITA No. 933/PUN/2013 filed by the assessee is directed against the order dated 09-12-2012 of the CIT(A)-II, Pune relating to Assessment Year 2009-10. For the sake of convenience, all these appeals were heard together and are being disposed of by this common order. ITA No. 1310/PUN/2013 and ITA No.1485/PUN/2013 ) :
2. Ground of appeal No.1 by the assessee and all grounds raised by the Revenue relate to the part relief granted by the CIT(A) out of the disallowance of Rs.68,86,009/- made by the Assessing Officer u/s.14A r.w. Rule 8D of the I.T. Rules.
3. Facts of the case, in brief, are that the assessee is an individual and engaged in the business of builders, promoters and developers. He filed his return of income on 31-10-2009 declaring total income of Rs.8,55,29,700/-. During the course of assessment proceedings the Assessing Officer observed that assessee has substantial investments from which it is receiving exempt income. Most of these investments are in the form of investments in shares of companies and in partnership firms, the income from which is exempt. He, therefore, asked the assessee to explain as to why proportionate disallowance should not be made as per the provisions of section 14A r.w. Rule 8D. The assessee filed a detailed explanation according to which the interest free funds available at its disposal are more than the investments made in the partnership firms and shares of Indian companies. It was submitted that Rule 8D should be resorted only after the Assessing Officer is not satisfied with the correctness of the claim of the assessee.
4. However, the Assessing Officer was not satisfied with the explanation given by the assessee. He observed that assessee has not maintained separate books of account for its business which is yielding exempt income 4 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 and for its business which is yielding taxable income. Moreover, the assessee is having a common pool of funds for its entire business operations including the business which is yielding exempt income. Therefore, the expenditure attributable to earning of exempt income can only be reasonably determined by invoking Rule 8D. He observed that the assessee has considered interest of only Rs.3,16,383/- while computing the disallowance as per Rule 8D. However, other than interest of Rs.3,16,383/- separately claimed in the profit and loss account, an amount of Rs.2,26,91,805/- has also been claimed and clubbed under the head purchases. He, therefore, considered for disallowance u/s.14A the interest of Rs.2,30,08,188/-, i.e. Rs.2,26,91,805/ + Rs.3,16,383. Applying the provisions of section 14A r.w. Rule 8D the Assessing Officer disallowed an amount of Rs.68,86,009/- and added the same to the total income of the assessee.
5. Before CIT(A) it was submitted that as against incurring of total expenditure of Rs.3,16,383/- the Assessing Officer disallowed an amount of Rs.68,86,009/-. Referring to the decision of the Delhi Bench of the Tribunal in the case of Gillette Group India Pvt. Ltd. Vs. ACIT and others and the decision of Mumbai Bench of the Tribunal in the case of M/s.Search Enviro Ltd. it was argued that the disallowance u/s.14A cannot exceed the actual expenditure.
6. So far as the interest cost of Rs.2,26,91,805/- is concerned it was stated that the same has not been charged to the profit and loss account but has been capitalized/added to the land cost as the borrowed funds/withdrawals made from the firm were utilized for the acquisition of land. Alternatively, it was requested that if the entire addition is not deleted then to restrict the expenditure incurred at Rs.3,16,383/-. 5
ITA No.1310, 1485,748, 749 & 933 /PUN/2013
7. So far as the observation of the Assessing Officer that the assessee has not maintained separate books of account for his business which related the exempt income and the one which has earned taxable income is concerned, it was submitted that there is no condition u/s.14A for non maintenance of separate books of account. It was accordingly argued that the disallowance made by the Assessing Officer should be deleted.
8. However, the CIT(A) was not fully satisfied with the explanation given by the assessee. Referring to the decision of Hon'ble Bombay High Court in the case of Godrej & Boyce reported in 328 ITR 81 he observed that as per the said decision the Assessing Officer is authorized to recompute the disallowance u/s.14A as per the prescribed method only in case he is not satisfied with the claim of the assessee having regard to its accounts.
9. So far as the argument of the assessee that its own funds are more than the investment made and no direct nexus between the borrowed funds and the investment is established is concerned, he observed that assessee has not demonstrated its justification by way of any accounting method or by its cash flow which can lead to inference that no expenditure has been incurred. He observed that the Assessing Officer has not resorted to adhoc disallowance as contended by the assessee but has arrived at the disallowance after invoking Rule 8D as prescribed and only thereafter has arrived at the figure of the expenditure incurred by the assessee.
10. As regards the submission of the assessee that interest cost of Rs.2,30,68,188/- has been capitalized and added to the cost of the purchases he observed that such capitalized interest has direct nexus with the land purchased by the assessee and therefore the said interest could not form part of the interest cost for working out the disallowance under Rule 8D as the same has not been charged to the profit and loss account. He therefore held that the AOs action in including the aforesaid interest 6 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 related to the capitalized interest is not correct in the given set of facts and circumstances of the case. Relying on various decision and applying provision of Rule 8D the Ld.CIT(A) restricted the disallowance u/s.14A r.w. Rule 8D at Rs.10,53,815/- and thereby gave relief of Rs.58,32,194/- to the assessee.
11. Aggrieved with such order of the CIT(A) in giving part relief the assessee as well as the revenue are in appeal before the Tribunal.
12. The Ld. Counsel for the assessee at the outset submitted that the assessee's own capital is more than the investment in the partnership firm as well as the investment in shares of different companies. Referring to page 24 of the paper book he drew the attention of the Bench to the capital of the assessee as well as the investment in partnership firms. He submitted that no disallowance has been made in the preceding years. Referring to the copy of the profit and loss account, copy of which is placed at page 132 of the paper book, he drew the attention of the Bench to the direct expenses of Rs.10,28,969.94 which includes the interest expenditure of Rs.3,16,383/- as per the details given in Page 137 of the paper book. He submitted that when the assessee has claimed the interest expenditure at Rs.3,16,383/- it was not proper on the part of the Assessing Officer to consider the entire interest and make the disallowance. He accordingly submitted that the disallowance sustained by the CIT(A) is also on the higher side and in no case it can exceed the amount debited to the profit and loss account. For the above proposition, the Ld. Authorised Representative relied on the following decisions :
1. Shri Ravi Kumar Shewani Vs. DCIT vide ITA No.2120/PN/2013 order dated 23-01-2015
2. ACIT Vs. Bedmutha Industries Ltd. vide ITA No.1277/PN/2013 order dated 29-01-2015
3. Gillette Group India Pvt. Ltd. Vs. ACIT reported in 51 SOT 221 (Delhi) 7 ITA No.1310, 1485,748, 749 & 933 /PUN/2013
13. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that Rule 8D has come into force from the A.Y. 2008-09. Therefore, the various decisions relied on by the assessee before the CIT(A) are not applicable to the facts of the present case. The assessee has also not explained the nexus between the borrowed funds and the investment in the partnership firms and shares of different companies. Therefore, Rule 8D has to be applied. He submitted that the assessee has not shown any work-in-progress. Land was not shown in the work-in-progress and the assessee has not proved that he has capitalized the interest.
14. The Ld. Counsel for the assessee in his rejoinder drew the attention of the Bench to the observation of the CIT(A) at para 3.5 of the order which reads as under :
"3.5. . . . . . . . . . . . . . . . It is an undisputed fact that the appellant had made investment of Rs.19.82 crores in the partnership firm and shares of companies and in mutual funds. The Assessing Officer, however, has calculated the disallowance u/s.14A r.w. Rule 8D by considering even the interest cost of Rs.2,30,68,188/- which also included the capitalized interest added to the cost of land of Rs.2,26,91,805/- in working out the disallowance u/4 8D. The aforesaid capitalized interest has a direct nexus with the land purchased by the appellant and, therefore, the said interest could not form part of the interest cost for working out the disallowance u/r 8D as the same has not been charged to the profit and loss account and only the interest amounting to Rs.3,16,383/- debited to the profit and loss account could be considered for working out the disallowance. The Assessing Officer's action in including the aforesaid interest related to the capitalized interest, in my considered opinion is not correct in the given set of fact and circumstances of the case. Thus the definition of variable as embedded in formula u/r 8D(2)(ii) specifically excludes interest expenditure directly related to exempt income and it does not include interest expenditure directly related to taxable income. Thus the working of the disallowance u/s. 14A r.w.r. 8D is as under:
Working as per Rule 8D
(i) Sub-rule 1(ii) 3,16,383 x 19,44,99,752 75,67,56,500 = 81,316/-
(ii) Sub-rule 2(ii) 0.5 x 19,44,99,752
= 9,72,499/-
Total 10,53,815/-
8
ITA No.1310, 1485,748, 749 & 933 /PUN/2013
He submitted that the CIT(A) has given a categorical finding that the assessee has capitalized the interest to land cost. He accordingly submitted that disallowance u/s.14A, if any, has to be restricted to the amount claimed in the profit and loss account.
15. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the assessee has claimed interest expenditure of Rs.3,16,383/- while computing the disallowance as per Rule 8D. It is also an admitted fact that assessee has separately claimed interest expenditure of Rs.2,26,91,805/- which has been clubbed under the head "purchases". We find the Assessing Officer disallowed an amount of Rs.2,30,08,188/- u/s.14A r.w. Rule 8D on the ground that assessee has not maintained separate books of account for its business which is yielding exempt income and for its business which is yielding taxable income. Further, the assessee has common pool of funds for its entire business operation including the business which is yielding the exempt income. We find in appeal the Ld.CIT(A) held that the interest expenditure which has been capitalised cannot be considered for computing the disallowance u/s.14A r.w. Rule 8D. He, however, applying the provisions of section 14A r.w. Rule 8D restricted such disallowance to Rs.10,53,815/-.
16. It is the submission of the Ld. Counsel for the assessee that since own capital and free reserves are more than the investment in the partnership firm and the investment in shares of Indian Companies, therefore, no disallowance u/s.14A r.w. Rule 8D is called for. It is his alternate submission that the disallowance u/s.14A r.w. Rule 8D in any 9 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 case cannot exceed the amount of interest expenditure claimed in the profit and loss account.
17. We find some force in the above argument of the Ld. Counsel for the assessee. From the various details furnished by the assessee in the paper book we find the following details :
Sr. Particulars 01-04-2008 31-03-2009 1 Investment in partnership firm 19,07,64,368/- 19,82,35,136/- 2 Capital 26,72,36,768/- 37,43,92,814/-
18. From the copy of the balance sheet filed along with the schedules, copy of which is placed at pages 131 to 148 of the paper boom, we find the investment in shares has been shown at Rs.4,55,134/- (page 143 of paper book). Thus, the total investment in the partnership firm as well as the shares of companies, the income of which is exempt, is much less than the own capital and free reserves of the assessee. The different Benches of the Tribunal are taking the consistent view, following the decisions of Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Ltd. reported in 313 ITR 340, and in the case of HDFC Ltd. Vs. DCIT reported in 383 ITR 529 and the decision of Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Max India Ltd. (No.2) reported in 388 ITR 81, that as long as assessee was in possession of interest free funds in excess of the amount invested in exempt income bearing investments, such investments should be presumed to have been made out of interest free funds available with the assessee. The rationale for the presumption is that an assessee would utilise its funds prudently ensuring that it derives the greatest financial advantage. The Third Member of the Delhi Bench of the Tribunal in the case of Wimco Seedlings Ltd. reported in 107 ITD 267 (Delhi)(TM) has held that only expenditure, which has been proved to have been incurred in relation to earning of tax free income can be disallowed and section 14A cannot be 10 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 extended to disallow such expenditure which is assumed to have been incurred for the purpose of earning tax free income.
19. Since in the instant case admittedly the own capital of the assessee is much more than the investment towards capital in the partnership firms and shares of Indian Companies the income of which is exempt from tax, therefore, we are of the considered opinion that no disallowance u/s.14A in the instant case is called for. We, therefore, set aside the order of the CIT(A) and direct the Assessing Officer to delete the disallowance made by him u/s.14A of the I.T. Act. Ground raised by the revenue is accordingly dismissed and the ground raised by the assessee on this issue is allowed.
20. Grounds of appeal No.2 and 3 by the assessee read as under :
"2. On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A)-II, Pune erred in confirming the addition of capital gain of Rs.12,15,54,375/- in respect of transfer of plot of land situated at Gat No.1277 & 1278, Village Wagholi , Dist. Pune without appreciating the facts of the case in proper perspective. The appellant hereby prays that the addition may please be deleted.
4. On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A)-II, Pune failed to appreciate the following feature/facts of the transaction of sale of land and various obligations to be performed by the appellant and co-owners.
(a) That the transaction under consideration has two limbs
(i) sale of the plot of land situated at Gat No.1277 and 1278, Village Wagholi, Dist. Pune at and for the consideration of Rs.125.50 lacs against the transfer of the land under consideration and (ii) the consideration of Rs.125.50 lacs against the performance of various obligation mentioning clause no.iv of the sale deed dated 2nd May 2008.
(b) That the capital gain arising from the transfer of the land @ Rs.125.50 lacs per acre is properly declared by the appellant and the balance 50% consideration was towards the performance of various obligation in terms of clause no.iv of the sale deed dated 2nd May 2008.
(c) That the consideration of Rs.251/- lacs per acre was much more than the prevailing market value of the land and the said amount embedded the consideration of performance of various obligations.11
ITA No.1310, 1485,748, 749 & 933 /PUN/2013 The appellant hereby prays that the addition of Rs.12,15,54,375/- made on account of long capital gain may please be deleted."
21. Facts of the case, in brief, are that during the assessment proceedings the Assessing Officer found that the assessee along with other co-owners sold agricultural land admeasuring 70 acres situated at Gat No. 1277 and 1278 at Village Wagholi, District Pune to M/s. Wagholi Properties Pvt. Ltd by a registered sale deed dated 2.5.2008. The Assessing Officer further noticed that as per clause 3 of the sale deed the consideration payable in respect of the land was Rs. 2,51,00,000/- per acre and the total consideration of the land was of Rs. 1,75,80,04,250/-. He noted that the assessee has considered sale consideration of Rs. 12,15,54,375/- as against the total agreed consideration of Rs. 24,31,08,750/- for the purpose of computing capital gain. The Assessing Officer, therefore asked the assessee to explain as to why the full value of sale consideration should not be adopted for computing the capital gains on sale of land.
22. The assessee submitted before the Assessing Officer that M/s Wagholi Properties Pvt. Ltd had purchased the aforesaid land for development of a special township project and the land purchased was part of the understanding between the vendors and the purchaser which was reflected in clauses II, III, IV, and V of the sale deed. It was submitted that as per the understanding between the vendors and the purchasers, the vendors were paid consideration of Rs. 1,25,50,000/- per acre against the transfer of land and the balance amount of Rs. 1,25,50,000/- per acre payable on performance of certain obligations as mentioned in the clauses of the agreement/sale deed. The assessee also stated that the transaction under consideration had two limbs (i) sale of plot of land for the consideration of Rs. 125.50 lakhs against the transfer of land and (ii) the consideration of Rs. 125.50 against the performance of various obligations mentioned as per clause (v) of the sale deed dated 2-5-2008. Thus, it was 12 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 contended before the Assessing Officer that the income neither accrued nor was received by the assessee and that the consideration of Rs. 251 lakhs per acre was much more than the prevailing market value of the land and the said amount embedded the consideration of performance of various obligations.
23. However, the Assessing Officer was not satisfied with the explanation given by the assessee. He arrived at the conclusion that the entire consideration as per the sale agreement was taxable as capital gains and not 50% of the amount as declared by the assessee. He noted that the assessee along with the other vendors had sold 70 acres of land at Wagholi to M/s Wagholi Properties Pvt. Ltd. and the possession of the said property had also been passed to the buyers and the stamp duty arising from the transaction on the aggregate consideration of Rs. 1,75,80,04,250/- at Rs. 7,03,20,170/- had also been paid and that the value of the entire transaction of 70 acres of land at Wagholi had been confirmed in the Index- II at Rs. 1,75,80,04,250/-. He observed that the contention of the assessee of the land sale transaction having two limbs viz. transfer of capital asset and performance of several obligations did not have any connection between the two so far as the calculation of the amount for the total sales consideration was concerned. The Assessing Officer specifically noted that the rate per sq. mtr and per acre was clearly mentioned in the agreement and there was no value ascribed to the obligation to be fulfilled by the assessee and other vendors and, therefore, the entire transaction could be divided into 2 parts viz.
i) Sale of 70 acres of land
ii) Procuring 38 acres of land and fulfilling certain obligations.
24. The Assessing Officer thus held that the sale of 70 acres of land at
(i) above was clearly taxable u/s 2(24) (v) of the Act and for the balance 38 acres at (ii) above, the assessee and other vendors were entitled to 13 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 receive the same amount of consideration i.e. 2,51,00,000/- per acre and the cost and expenses to be borne by the assessee along with others will be claimed as a business expenditure while determining the taxable income. The Assessing Officer with respect to the claim of the assessee that he had no 'right to receive' money held the same to be not relevant as the transaction was being taxed under the head 'Capital gains' and not 'business income' and that the assessee had himself treated the sale of land as sale of a "capital asset". As regards the plea of the assessee that the fair market value of the property was much less than the sales consideration of Rs. 2,51,00,000/- per acre indicating the consideration comprising of other components than land is concerned, the Assessing Officer noted that there was no mention in the sale agreement that 50% of the consideration related to the land component and the balance 50% related to fulfilling of specific obligations listed in the agreement. He noted that the assessee along with others had shown the full value of the transaction at Rs. 1,75,80,04,250/- for the purposes of registration and before the stamp duty authorities. The Assessing Officer further noted that the sale agreement entered into by the assessee and other vendors did not contemplate any artificial division of the total consideration as contended by the assessee as the-buyer M/s. Wagholi Properties Pvt. Ltd. had paid stamp duty on the total consideration of Rs. 175.80 crores and as such there was no ambiguity • regarding the sale consideration @ Rs. 2.51 crore per acre and there being no dispute for the same between the parties. The Assessing Officer also rejected the claim of the assessee that the effective date of transfer of the property did not depend solely on the agreement but also on the intention of the parties in the transaction. The Assessing Officer relied on the decision of the jurisdictional Hon'ble Bombay High Court in the case of Chatturbhuj Dwarkadas Kapadia reported in 260 ITR 497, wherein it has been held that after introduction of section 2(47) (v) r.w. sub-section 45, capital gain is taxable in the year in 14 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 which such transaction is entered into even if the transfer of immovable property is not effective or complete under the general law. Distinguishing the various decisions cited before him the Assessing Officer held that since the sale deed agreement for the sale of 70 acres of land was duly registered on 02-05-2008 and the stamp duty was paid and the possession over the property was also passed on to the purchaser, therefore, the entire consideration has to be considered for the purpose of computing the capital gains. The Assessing Officer accordingly adopted the assessee's share at Rs. 24,31,08,750/- as against Rs.12,15,54,375/- adopted by the assessee for the purpose of computing capital gain.
25. Before CIT(A) the assessee reiterated the same submissions as made before the Assessing Officer during the assessment proceedings. It was argued that the transaction has two limbs, namely, transfer of the capital asset and performance of various obligations. The attention of Ld.CIT(A) was drawn towards clause No. (iv) of the sale deed. It was submitted that accrual of income means the assessee must have right to receive the income and since the assessee in the instant case has neither received the income nor the income has accrued, therefore, notional income cannot be brought to tax. It was contended that the capital gain cannot be taxed if there is no receipt of consideration or the consideration has not accrued to the assessee. It was submitted that in a situation where the right to receive payment is in dispute and is not merely a question of quantified amount to be received, income cannot be said to have been accrued to the assessee. The assessee stressed on the point of right to receive the amount and submitted that the assessee did not have a right to receive and, therefore, there was no question of taxing the same. It was explained that the transaction be considered in two parts i.e. transfer of land falling under the head Capital gains and performance of various obligations treated as a business transaction. It was stated that the 15 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 consideration of Rs. 251 lakhs per acre includes something more than the consideration of the capital assets i.e. the cost of the performance of capital assets. Relying on various decisions it was contended that the stamp duty cannot be the basis for taxing the capital gains.
26. However, the CIT(A) was not satisfied with the explanation given by the assessee and upheld the action of the Assessing Officer by observing as under :
"4.3 The appellant along with other co-owners of a property admeasuring 70 acres situated at Wagholi have sold the entire property to Wagholi Properties Pvt. Ltd by a registered sale deed dated 2-5-2008 for a total consideration of Rs. 1,75,80,04,250/- and the total share of the appellant being 19,80,41,750/-. The appellant on the other hand has offered only 50% of the total value of sale consideration for computing capital gain on sale of the aforesaid land on the plea that the balance 50% of the amount of Rs. 1,25,50,000/- per acre is payable on performance of certain obligations as per the clauses of the sale deed. Thus the contention of the appellant is that the transaction has two limbs - one relating to the transfer of property i.e. sale of land and second relating to performance of obligations. The materials brought on record clearly indicate that the possession of the property in question has been passed on to the buyers and the stamp duty arising on the total aggregate consideration of Rs. 1,75,80,04,250/- of Rs. 7,03,20,170/- has also been paid in its entirety. The sale deed of the property has also been duly registered with the registering authority on 2-5-2008.
4.4 In the scheme of the Act, whenever an assessee receives money or money's worth in the course of the transaction, income embedded therein accrues or arises to him. The chargeability of income to 'capital gains' is with reference to the full value of consideration received or accruing as a result of the transfer of capital asset deducting the expenditure incurred therein. The charge of capital gains arises only when there has been a duly executed and registered deed of sale. The year of assessment would be the year corresponding to the previous year of the assessee in which the sale took place. This is for the reason that Sec. 45 enacts that the capital gains shall by fiction "be deemed to be the income of the previous year in which the transfer took place. Since this is statutory fiction, the actual year in which the sale price was received, whether it was one year or three years or five years etc, previous to the previous year of transfer is beside the point. The entirety of the sum or sums received in any earlier year or years would be regarded as the capital gain arising in the previous year of transfer where the payment of the sale price is postponed to a future date and the deed of transfer vest the title in the transferee on the execution of the documents, even so, the above fiction operates. In the words of Sec. 45, the capital gains arising from the transfer 'shall be the income of the previous year in which transfer took place'. So, the payment of consideration stipulated to be paid in future would have to be attributed, by statutory mandate to the year of transfer. Merely because 16 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 the assessee receives the consideration after the year, liability cannot be postponed as capital gains arise on date of transfer. An analysis of sub-section (1) of Sec. 45 indicates that following conditions are necessary to attract the provisions of sub-section (1) for any particular year viz, there should be a capital asset, that capital asset should have been held as owned by the assessee, a 'transfer' of that capital asset should have been effected, such transfer should have been 'effected', in the previous year' relevant to particular assessment year and profits or gains should have arisen from such transfer. If these conditions are satisfied, then profits and gains in question are chargeable to income tax under the head 'capital gains' and would be deemed to be the income of the year in which transfer took place. In order to attract tax on capital gains, subject matter of transfer should be a capital asset which has been defined u/s 2(14). In the present case, this aspect has not been disputed. Capital gains arise on transfer of a capital asset. Hence, it is the date of transfer, which is relevant so that the assessment year is the accounting year during which the taxable event falls. Now the financial year is mandatorily the accounting year, there would be no controversy in respect of the assessment year as long as the taxable event with reference to the date of transfer is determined. The appellant's contention of 'Right to Receive" in this context is not relevant as it is relevant for the purpose of business and other sources. In the case of CIT Vs Ramesh Khanna (2001) 249 ITR 359 (Del), it was decided in that for A.Y. 1976-77, when financial year was not mandatory, ,the assessee could choose the accounting year with reference to the previous year for which accounts are kept by him purportedly following the ruling of Supreme Court in CIT Vs Lady Kanchanbai (1970) 77 ITR 123 (SC). But assessee's method of accounting and the choice of accounting year is relevant only for business or other sources so that the decision of the Supreme Court could not have applied for income from capital gains. In the present case, however, the consideration is determinate as per the fact on record as the entire sale consideration fixed for the land has been determined in the sale deed and the buyer M/s Wagholi Properties Pvt. Ltd has paid the entire registration cost on the total sales consideration of Rs. 7,03,20,170/- and further the sale deed has been also registered on 2-5-2008. Thus the fact on record as brought out, clearly indicate the transfer u/s 2(47) of the property or asset u/s 2(14) liable for capital gains on the full consideration and not in part as contended by the appellant. The Calcutta High court in the case of CIT Vs Bhupinder Singh Atwal (1983) 140 ITR 928 (Cal) held that since this section creates an item of 'artificial income' its provisions should be strictly construed. The conditions as envisaged in Sec. 45 are satisfied in the present case so as to attract the charge of tax on the full value consideration. The appellant's reliance thus placed on the case of E.O. Sassoon & Co Ltd Vs CIT 26 ITR 27 (SC) was in the context of transfer of an income bearing asset the expectancy of earning income there from at a future date the corpus as well as the expectancy would form a single capital asset. In the present case there is no such case on fact, hence the reliance placed is distinguishable and not applicable to the present case. The other case laws relied upon by the appellant with respect to the accrual and arisal of income is applicable in the context of business transactions falling under the head "Income from business and profession" and the same does not apply to income under the head "capital gains".
4.5 According to section 45(1) of the Act, the year of chargeability of capital gains will be the year in which the transfer within the meaning of any of the sub-clauses of Sec. 2(47) took place. In case of Smt. Lalitha 17 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 Ramaswamy Vs ITO (2001) 75 ITO 293 (Bom), the assessee had entered into an agreement for sale with regard to a bungalow at Bangalore and as per the agreement the assessee agreed to sell the immovable property in consideration of Rs. 9.60 lacs which was to be received as per the schedule of payments decided between parties. It was held that whereas each fact taken in isolation may not be sufficient to take one view or the other, but the totality of the facts and circumstances taken into account do establish that the possession of the property was handed over to the vendors before 31-03-1987, therefore, capital gains were assessable during the year when the agreement was made.
4.5.1 In Addl. CIT Vs G.M. Omarkhan (1979) 116 ITR 950 (AP) it was held that to attract the liability to tax u/s 45, it is sufficient if, in the accounting year profit have arisen out of the transfer of capital asset, in other words the assessee had a right to receive the profits. Actual receipt of profits is not a relevant consideration. Where once profit have arisen in the accounting year out of the transfer of the capital asset that would be sufficient to attract liability u/s 45. This view was later affirmed in G.M. Omar Khan Vs Addl CIT (1992) 196 ITR 269 (SC). The Madras High Court in the case of T.V. Sundaram Iyengar & Sons Ltd Vs CIT (1959) 37 ITR 26 (Mad) held that the Sec. 45 does not speak of any arising receipt at all. The crucial word used here is arising. Even in a case where transfer is made in a current year but price is to be paid at any future date during the next year the assessee would have received a right to receive the price in the year of transfer. Therefore, profits would have arisen to the assessee in the year in which transfer took place even though the price was paid in a subsequent year. 4.5.2 In ICI India Vs DCIT (2002) 80 ITD 58 (Cal) (Trib) there was a single agreement and by a single conveyance deed property was transferred by the assessee. The entire transfer process was one and indivisible it was, therefore, not possible to comprehend that a part of property was transferred under deeming provisions of Sec. 2(47)(vi) in one year and balance portion under actual provision of sec. 45 in later year. Although the MOU provided only for allowing a license to the purchaser to use the property, this should be considered as sufficient situation involving actual hand over of the possession of the property in respect of such parts thereof which had been stipulated in the original agreement. Hence, the present case could come within the ambit of 'Part performance' as mentioned in see 53A of the Transfer of Property Act, and consequently under the purview of see 2(47)(v) of the Act. The court thus upheld the 'transfer' by virtue of the extended definition of 'transfer'.
4.5.3 In the case of CIT Vs Rohtak Textile Mills Ltd (Del) 128 ITR 195, sale took place during the year, the capital gain was held to be taxable during that year even though dispute on sale price is still pending. In TV. Sundaram Iyengar & Sons Ltd Vs CIT (1959) 37 ITR 26 (Mad), capital gain is attracted moment the assessee has acquired the right to receive the profits and it is not necessary that the assessee should have actually received the profits. If subsequently the money is not actually received, that would be a capital loss arising in the year when the money became irrecoverable. According to section 48, the income chargeable under the head 'capital gains' is to be computed by deducting from the full value of consideration received or accruing as a result of transfer of capital asset, the expenditure incurred wholly and 18 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 exclusively in connection with such transfer and the cost of acquisition of the asset and the cost of any improvement thereto. It is, therefore, necessary to appreciate the significance and scope of the words 'full value of consideration' so as to identify amounts which constitute a part of the full value of consideration and the amounts which do not. In the case of CIT Vs George Henderson & Co. Ltd. (1967), 66 ITR 622 (SC), the apex court was of the view that the expression 'full value on consideration cannot be construed as having reference to the market value of the asset transferred but the expression only meant the full value of consideration received by the transferee in exchange of the capital asset transferred by him. The Supreme Court also observed that in the case of a sale the full value of consideration is the full sale price actually paid. It was further of the view that the expression 'full value' means the whole price without any deduction, whatsoever, and it cannot refer to the adequacy or inadequacy of the price bargained for. In the case of CIT Vs Gillanders Arbuthnot & Co. (1973) 87 ITR 407 (SC) the Hon'ble court observed that in the case of a sale price of an asset all that one had to see was what was the consideration bargained for. Thus the decisions make it more clear that the expression 'full value of consideration' that is used in section 48 is to the reference only to the consideration referred to in the sale deeds as the sale price of the assets which have been transferred.
4.5.4 In the case of CIT Vs Smt. Nilofer I. Singh (2009) 309 ITR 233 (Del), it was held that the expression 'full value of consideration' that is used in section 48 does not have any reference to the market value but only to the consideration referred to in the sale deed as the sale price of the asset which have been transferred. The issue of 'full value of consideration' also came up before the Madras High Court in the case of Venkatesh Vs CIT (2000) 243 ITR 367 (Mad), where the assessee entered into an agreement to sell the shares held by him in two companies for the above market price. The Assessing officer computed the difference between the value of sale price and the cost of acquisition as long-term capital gains. The assessee submitted that the sale price did not wholly pertain to value of the shares held by him but part of the amount was received as consideration and represented transfer of controlling interest in companies. It was held that the controlling interest is an incidence arising from holding of a particular number of shares in a company and cannot be separately acquired or transferred, therefore, it is not a separate capital asset u/s 2(14). Therefore, the price paid for the shares by the Vendor is, therefore, the price paid for acquiring the shares and the entire consideration is required to be considered for the purpose of computing the capital gains in the hands of the assessee. Similar view was also taken in the case of Smt. P.S. Vasantha Vs CIT (2004) 186 CTR 288 (Mad), following the decision in the case of Venkatesh & ors Vs CIT (cited supra). 4.6 The appellant's contention of the comparative sale instances to justify the cost of the performance of capital asset inclusive in the sales consideration does not become relevant for the purposes of sales consideration taken for the purposes of capital gains u/s 45 of the Act. The appellant has not artificially decided the total consideration for the purposes of registration. The buyer has got the property registered and paid the stamp duty on total consideration which is stated by the appellant to include the cost of certain performances and under obligations for which the appellant's contention of the transaction having two limbs does not hold good for the purposes of taxation of 19 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 income under the head Capital gains. The appellant has not brought on record any such material which could justify any such value to the above stated performance or obligations as envisaged in the sale deed. The sale deed even envisages of transferring further land having area of 38 acres (108 - 70), but the same has not been performed during the year under consideration as the same has not yet been transferred by the appellant. The appellant's contention of the performance of various obligations be treated as business transaction, it is seen that the appellant, as is evident from material on record has been the owner of the land for a substantial period of time and shown it as an investment and not stock-in-trade. The material on record as brought out during the course of the appellate proceedings prima facie indicate that the purchase of land was not for the purpose of business and that the appellant was also not a dealer in land and the appellant has not carried on any business with respect to land. The gains arising from transfer of land will be 'capital gains' and not business income since the land has been shown to have been held as investment and not stock-in- trade. In any case, the aforesaid issue is not relevant as the said transaction of the procuring 38 acres of land is not the issue in this ground of appeal raised by the appellant.
4.7 In view of the above facts, the action of the Assessing officer in adopting the full value of consideration for computing the capital gains of Rs. 24,31,08,750/- as against Rs. 12,15,54,375/- shown by the appellant is justified and, therefore, the same is upheld and the grounds of appeal No 2 & 3 raised by the appellant are liable to be dismissed."
27. Aggrieved with such order of the CIT(A) the assessee is in appeal before the Tribunal.
28. The Ld. Counsel for the assessee referring to the copy of the sale deed with M/s. Wagholi Properties Pvt. Ltd., a copy of which is placed at pages 50 to 81 of the paper book, drew the attention of the Bench to the various clauses of the sale deed. Referring to page 11 of the sale deed the Ld. Counsel for the assessee drew the attention of the Bench to clause (iii) of the sale deed which specifies the obligation of the assessee. As per the said clause (iii) the vendors and consenting parties have agreed to get total contiguous land admeasuring 108 acres (approximately) of Mouje Wagholi, Taluka Haveli, Dist. Pune to be transferred in favour of the purchaser for a consideration @ Rs.2,51,00,000/- per acre. Referring to the page 12 of the sale deed the Ld. Counsel for the assessee drew the attention of the Bench to clause (v) of the sale deed according to which the vendors and consenting parties require time to fulfil the said obligations for which it was 20 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 agreed by and between the parties that the purchasers shall pay 50% of the total consideration in respect of the said property at the time of execution of the sale deed and the balance 50% consideration to be paid by the purchaser within 30 days upon the vendors and the consenting parties completing in entirety their obligation as enumerated in clause (iv) above.
29. Referring to page 13 of the sale deed, copy of which is placed at page 66 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to clause (ii) according to which the vendors and the consenting parties have agreed that the purchaser shall pay the balance amount of Rs.87,90,02,125/- within 30 days from the vendors and the consenting parties completing their obligations as enumerated in clause (iv) above. He accordingly submitted that the right to receive the above amount of Rs.87.90 crores was only after completion of the obligation. Referring to page 14 of the sale deed (page 67 of the paper book) the Ld. Counsel for the assessee drew the attention of the Bench to the last para according to which the value as per ready reckoner is Rs.49,38,000/- per Hectare only. Thus the market value is Rs.41 crores whereas the consideration agreed between the parties is Rs.1,75,80,04,250/- and the stamp duty is Rs.7,03,20,170/-. He submitted that the assessee has delivered the possession for 70 Acres and not 108 Acres. He further submitted that nobody will pay such a huge amount for a single sale of land. Referring to pages 82 to 89 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the various clause of the Maharashtra Regional and Town Planning Act, 1966. Referring to clause 5.2 (i) of the said Act (page 85 of the paper book) he drew the attention of the Bench to the following :
21
ITA No.1310, 1485,748, 749 & 933 /PUN/2013 "5.2 SPECIAL TOWNSHIP IN AGRICULTURE/NO DEVELOPMENT ZONE
(i) Development of Special Townships project in Agricultural/No Development Zone, Green Zone and Urbanizable Zone, contained in the Regional plan shall be permissible subject to conditions that 50% of the gross area of the project shall be kept open while the project of Special Township shall be executed on the remaining 50% land with gross built up area /FSI of 0.50 worked out on the entire gross area of the project. Further, while developing such projects, it would be obligatory on the part of the developer to provide and develop all the infrastructure facilities including sites required for public purposes as per the prescribed planning norms. As regards 50% of land which is required to be kept open, the same shall be made free of encumbrances and no development except town level open amenities shall be permissible thereon."
30. Referring to the area requirement for substantial township for area under Pune Regional plan the Ld. Counsel for the assessee drew the attention of the Bench to the following clause of the said act (page 88 of the paper book).
"1.1 AREA REQUIREMENT : Any suitable area having sufficiently wide means of access (not less than 18 mt wide) can be identified for the purpose of development as "Special Township". The area notified under the Special Township shall be one continuous unbroken and uninterrupted and in any case shall not be less than 40Ha (100 acres) at one place, which shall not include the area under notified forest, water bodies like river, creek canal, reservoir, Tribal lands, lands falling within the belt of 500 mt. from the HFL of major lakes, land falling in the command area of irrigation projects, land falling within the belt of 200 mt. from the historical monuments and places of Archaeological importance, Archaeological monuments, Heritage precincts and places, any restricted area, notified National Parks, existing and proposed industrial zone, gaothan areas or congested areas."
He submitted that the amount received by the assessee is not a consideration for transfer of the assets only but it will accrue to the assessee only after fulfilment of the obligations. Referring to the copy of the tax payable for A.Y. 2009-10 (page 99 of the paper book) by showing the same as income from capital gain the Ld. Counsel for the assessee submitted that if the method adopted by the Assessing Officer is considered, then the tax payable for the year comes to Rs.2,75,44,229/-. He submitted that if the same is considered as business income, then the 22 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 tax payable in A.Y. 2014-15 comes to Rs.3,94,93,061/-. He submitted that the assessee has paid higher tax by offering the balance amount as business income in A.Y. 2014-15.
31. Referring to the decision of Hon'ble Bombay High Court in the case of CIT Vs. Mrs. Hemal Raju Shete in Income Tax Appeal No.2348/2013 order dated 29-03-2016 he submitted that the Hon'ble High Court in the said decision has held that when the consideration is postponed then the capital gain has to be taxed in the later year.
32. Referring to page 3 of the paper book No.3 the Ld. Counsel for the assessee drew the attention of the Bench to the map containing the access road. Referring to page 5 of the paper book No.3 he drew the attention of the Bench to the letter dated 11-12-2015 by M/s. Proxima Creations to the assessee according to which they have agreed to hand over the area of 490 sq.mtrs out of their land bearing S.No.68/1B, Kharadi to the concerned authorities of Municipal Corporation, Pune at the request of the assessee for the Township Project by M/s. Wagholi Properties Pvt. Ltd. on the land sold by the assessee. Referring to the letter written by Marvel Landmarks Pvt. Ltd. on 11-12-2015, copy of which is placed at page 6 of the paper book, the Ld. Counsel for the assessee submitted that they have also agreed to hand over the portion of land admeasuring 5260.94 sq.mtrs out of their land holding of 64314.66 sq.mtrs. to the concerned Municipal authorities for getting the road executed. Referring to the letter written by Marvel Bharucha Realtors dated 11-12-2015, copy of which is placed at page 7 of the paper book, he submitted that they have also agreed to hand over the area admeasuring 453.64 sq.mtrs out of their land holding of 23150 sq.mtrs. to the concerned Municipal authorities for execution of the said road. Referring to the letter addressed by Mr. Bharat M. Parwani (Manager of HUF), Mr. Chandan M. Parwani (Manager of HUF) and Mrs. 23 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 Indira M. Parwani vide common letter dated 15-12-2015, copy of which is placed at page 8 of the paper book, he submitted that they have also agreed to offer a part of their land admeasuring 00.40 Ares in favour of Wagholi Properties for facilitating their township project. Referring to page 9 of the paper book he submitted that the mutation of the land was done on 01-04-2013. He submitted that the assessee has completed his part of obligation in F.Y. 2013-13 relevant to A.Y. 2014-15.
33. Referring to the letter addressed by Mr. Atul Chordia, Director of Wagholi Properties Pvt. Ltd. to the DCIT on 26-03-2012, copy of which is placed at pages 41 to 44 of the paper book No.III he submitted that Mr. Chordia has replied to the Assessing Officer in response to notice u/s.226(3) for recovery of dues in case of the assessee for a sum of Rs.4,66,82,600/- according to which the balance amount of Rs.17.01 crores although accrued is due and payable only on compliance of certain conditions mentioned in the aforesaid agreement. It has been mentioned in the said letter that since certain conditions as per sale deed were not satisfied, therefore, the balance amount of Rs.17.01 crores has not become due as on date within the meaning of section 226(3) of the I.T. Act. Accordingly, they have expressed their inability to pay any amount and objected to the said notice u/s.226(3).
34. Referring to provisions of section 48 of the I.T. Act he submitted that consideration is linked to transfer. Therefore, for the purpose of capital gain only Rs.75 crores and not whole of the amount can be considered. He submitted that if the entire consideration is brought to tax then it amounts to rewriting of the agreement which is not permissible. For the above proposition, he relied on the decision of the Hon'ble Supreme Court in the case of Mangalore Ganesh Beedi Works Vs. DCIT reported in 378 ITR 640 and the decision of Hon'ble Bombay High Court in the case of Citibank N.A. 24 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 reported in 261 ITR 570.
35. Referring to decision of the Hon'ble Supreme Court in the case of CIT Vs. Hindustan Housing and Land Development Trust Ltd. reported in 161 ITR 524 he submitted that the Hon'ble Supreme Court in the said decision has held that there is a clear distinction between cases where the right to receive payment is in dispute and it is not a question of merely quantifying the amount to be received and cases where the right to receive the payment is admitted and the quantification only of the amount payable is left to be determined in accordance with the settled or accepted principles. Accordingly, they upheld the decision of Hon'ble Calcutta High Court in holding that it is only on the final determination of the amount of compensation that the right to such income in the nature of compensation arises or accrues and till then there is no liability in praesenti in respect of the additional amount of compensation claimed by the owner of the land. He submitted that right to receive in the instant case is disputed. Therefore, the case of the assessee squarely falls with the case decided by the Hon'ble Supreme Court in the case of Hindustan Housing and Land Development Corporation (Supra).
36. So far as the various decisions relied on by the CIT(A) are concerned he submitted that all those decisions are distinguishable and not applicable to the facts of the present case. In all those cases there was right to receive but they were deferring the receipt of the payment. However, in the instant case, the right to receive is contingent upon fulfilment of certain conditions. He accordingly submitted that the order of the CIT(A) be set aside and the grounds raised by the assessee be allowed. He also relied on the following decisions :
1. Aziende Colori Nazionali Affini Vs. CIT reported in 110 ITR 0145
2. CIT Vs. Citibank N.A. reported in 261 ITR 0570
3. CIT Vs. Kolhia Hirdagarh Co. Ltd. reported in 17 ITR 0545 25 ITA No.1310, 1485,748, 749 & 933 /PUN/2013
37. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). Referring to page 14 of the sale deed (page 67 of the paper book) he submitted that the consideration agreed between the parties is Rs.175, 80,04,250/-. He submitted that this is the value of property and it has nothing to do with the obligations. Referring to page 12 of the sale deed (page 65 of the paper book) he submitted that there is absolute transfer of the said land by the vendors and the consenting parties to the purchaser. Referring to page 14 of the sale deed (page 67 of the paper book) he submitted that the vendors at the time of the execution of the deed have delivered to the purchaser, the vacant and peaceful possession of the said property and the purchaser herein confirms having received the same.
38. So far as the clause relating to the vendors and the consenting parties agreeing that the purchaser shall pay the balance 50% amount of Rs.8,79,02,125/- within 30 days from the vendors and the consenting parties completing their obligations is concerned, he submitted that it has nothing to do with the transfer. The clause did not say that in absence of fulfilment of obligation it will revert back. So far as the submission of the Ld. Counsel for the assessee that the price is much more than the stamp duty valuation is concerned, he submitted that it is obligatory on the part of the assessee to fulfil the obligations confirming to the recitals. Considering the size of the plot, the market value in the instant case is reasonable. Further, meeting the obligations is very easy since the assessee had sufficient land with him. He accordingly submitted that the Assessing Officer was fully justified in bringing to tax the whole of the amount and the CIT(A) was also justified in upholding the same. He accordingly submitted that the grounds raised by the assessee should be dismissed. He also relied on the decision of Hon'ble Supreme Court in the case of K.P. Varghese Vs. ITO reported in 131 ITR 597.
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ITA No.1310, 1485,748, 749 & 933 /PUN/2013
39. The Ld. Counsel for the assessee in his rejoinder submitted that the deed has to be read as a whole. We cannot ignore the various other clauses of the sale deed. If the agreement is read as a whole the amount of Rs.175, 80,04,250/- does not accrue to the assessee. Transfer is complete only for 70 Acres. The consideration received was as a result of transfer and the result of fulfilment of the obligations. He submitted that the assessee had declared the extent of the amount received during the year since it could not have waited for 5 years to get his money for small tax savings.
40. So far as the submission of the Ld. Departmental Representative that the as per the clause there is absolute transfer and there is peaceful and vacant possession is concerned he submitted that it is the usual language written in the sale deeds. No time limit is required and it is contingent upon fulfilment of the obligations. So far as the decision relied on by the Ld. Departmental Representative in the case of K.P. Varghese reported in 131 ITR 597 is concerned he submitted that the same is not applicable to the facts of the present case and is distinguishable since in the instant case the right to receive has not been postponed. It is not due, therefore, the income does not accrue.
41. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee during the year under consideration has sold a plot of land admeasuring about 70 Acres to Wagholi properties Pvt. Ltd. along with various co-owners. The plot of the land situated at Gut Nos. 1277 and 1278 at Village Wagholi, Dist, Pune was sold vide sale deed dated 02-05-2008 which was registered in the office of the Sub-Registrar, Haveli-19. As per the clause (iii) of the sale deed (page 11 of the sale 27 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 deed) the consideration for the sale was Rs.2,51,00,000/- per Acre. The total consideration of the land admeasuring about 70 Acres was Rs.175,80,04,250/-. Out of the total sale consideration payable the buyer has paid 50% of consideration at the time of execution of the sale deed, i.e. an amount of Rs.87,90,02,125/-. The assessee's share in the total sale consideration was Rs.24,31,08,750/-. However, the assessee had worked out the capital gain by considering the sale consideration at Rs.12,15,54,375/- being the amount received by the assessee at the time of execution of the said agreement. We find the Assessing Officer computed the capital gain on sale of land by adopting the full value of sale consideration at Rs.24,31,08,750/-. He accordingly determined long term capital gain on account of sale of land at Wagholi at Rs.24,11,76,938/- which has been upheld by the CIT(A). The reasoning of the CIT(A) in upholding the action of the Assessing Officer has already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that assessee has received only 50% of the amount and the balance 50% amount will be received only on completion of certain obligations. Since the obligations were not carried out during the impugned assessment year, therefore, the right to receive although accrued has not become due. According to him if a part of the consideration is postponed due to non-fulfilment of certain conditions, then the capital gain has to be taxed in the later year, i.e. in the year in which such amount is received and the entire amount cannot be brought to tax in the year of the transfer.
42. We find some force in the above argument of the Ld. Counsel for the assessee. We find clause (iii to v) of the sale deed (page 64 to 66 of the paper book and page 11 to 13 of the sale deed) read as under :
"iii. The purchaser has informed the parties to this Agreement that they intend to acquire the said property more particularly described in Schedule V hereunder written for the purpose of development of a Special Township, project in accordance with the Regulations framed 28 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 by the Development of Special Township by the Government under the provisions of the Maharashtra Regional and Town Planning Act, 1966 for which purpose the Purchaser are required to acquire land admeasuring a minimum area of 100 acres. The Vendors and Consenting parties have agreed to get total contiguous land admeasuring 108 Acres (approximately) of Mouje Waholi, Taluka Haveli District Pune transferred in favour of the Purchaser at and for the consideration calculated at the rate of Rs.2,51,00,000/- per acre (Rs.6275/p- per sq.mt.) of land available at site on measurement. As part of the said transaction and relying upon the assurance of the Vendors that they shall get conveyed remaining land out of the said total contiguous area of 108 Acres (approximately), the Purchaser has accordingly agreed to purchase the said property more particularly described in Schedule V written hereunder and admeasuring 2,80,160 sq.mtrs., at and for the total consideration of Rs.175,80,04,250/- (Rupees one hundred and seventy five crore eighty lakh four thousand two hundred and fifty only). Out of the said total consideration, Rs.87,90,02,125/- (eighty seven crore ninety lakhs two thousand one hundred and twenty five only) is to be paid to the Vendors and the Consenting Parties on the execution of this Sale Deed.
iv. The Vendors and the Consenting Parties are aware that the Purchaser has purchased the said property for development of a Special Township Scheme and have thereby jointly and severally represented to, the Purchaser to complete the following obligations in entirety at their own costs and expense, which obligations form the essence of this contract ("the said obligations").
a. To execute Sale Deeds in favour of the Purchaser herein for a total contiguous land area of 108 acres (approximately);
b. To furnish demarcation certificates issued by the concerned authority of land records along with a separate 7/12 extract in favour of the Purchaser for the entire land admeasuring 108 acres (approximately including the said property.
c. To deliver at their own costs and expenses clear and marketable title to the entire contiguous land admeasuring 108 acres (approximately) for the development of Special Township Project in accordance with the Regulations framed by the Development of Special Township by the Government under the provisions of the Maharashtra Regional and Township Act 1966 and also at their own costs and expense to fence the entire contiguous land area of 108 acres for the Purchaser herein;
d. To deliver a legal and practical 24 meter access road to the contiguous 108 acres land;
e. To obtain consent of co-owners of balance plots, so as to enable the Purchaser to obtain all other permissions as would be required for smooth implementation of the Special Township Project.29
ITA No.1310, 1485,748, 749 & 933 /PUN/2013 f. Delivery of all original title documents, revenue records and other relevant documents to the satisfaction of the Purchaser herein relating to the entire contiguous land of 108 acres (approximately) including the land in the schedule herein;
g. to record Occupant Class I on 7/12 extract of Gat No.1277 (old 2263) in accordance with mutation entry No.1021 dated 10.12.2003.
h. To repay and obtain No dues certificate from relevant authorities with respect of the loan amount owed by Shri Balu Daulati Avhali and Sou. Asha Balasaheb Avhali to the Wagholi VKS Credit Society and to get the charge created thereon vide Mutation Entry Nos.6205 and 6206 dated 15.04.1998 removed.
v. As the Vendors and the Consenting Parties require time to fulfil the said obligations, it is agreed by and between the parties that the Purchaser shall pay 50 (fifty) per cent of the total consideration as more specifically described in Schedule VI hereunder in respect of the said property at the time of execution of this Sale Deed and the balance 50 (fifty) per cent consideration to be paid by the Purchaser within 30 days upon the Vendors and the Consenting Parties complying in entirety their obligations as enumerated in Clause iv hereinabove. Upon receipt of balance consideration the Vendors and the Consenting Parties shall simultaneously, execute a proper receipt acknowledging the entire price and consideration. Upon the Vendors and Consenting Parties successfully completing the execution and registration of the Sale Deeds with respect to 108 acres in favour of the Purchaser herein, the Purchaser shall deliver to the Vendor a Bank Guarantee for the balance 50% consideration, upon compliance of the obligations in entirety as enumerated in Clause IV hereinabove by the Vendors and Consenting Parties.
NOW THEREFORE THIS DEED WITNESSES that in consideration of said sale, conveyance and otherwise absolute transfer of the said Land by the Vendors and the Consenting Parties to the Purchaser, the Purchaser, is paid to the Vendors and the Consenting Parties and the Vendors and Consenting Parties accordingly accepted from the Purchaser, the said consideration of Rs.175,80,04,250/- (Rupees one hundred and seventy five crore eighty lakh four thousand two hundred and fifty only) as more particularly described in Schedule VI hereunder.
Further, the Vendors and the Consenting Parties have agreed that the Purchaser shall pay the balance 50% (fifty percent) amount of Rs.87,90,02,125/- (eighty seven crore ninety lakhs two thousand one hundred and twenty five only) within 30 days from the Vendors and the Consenting Parties completing their obligations as enumerated in Clause IV hereinabove."
43. From the above, it is clear that the sale deed is complete only after fulfilment of the obligations that has been undertaken by the assessee. We find somewhat identical issue had come up before the Hon'ble Bombay 30 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 High court in the case of Hemal Raju Shete (supra). In that case the assessee filed her return declaring total income of Rs.11,68,470/-. She had shown the long term capital gain of Rs.42,38,674/- arising out of the sale of 75,000 shares of M/s. Unisol Infraservices Ltd. (M/s. Unisol) to one M/s. Radha Krishna Hospitality Services Pvt. Ltd. in terms of an agreement dated 25-01-2006. The Assessing Officer on perusal of the agreement dated 25-01-2006 noted that the respondent assessee as well as other co- owners (Shete family) of M/s. Unisol were to receive in aggregate a sum of Rs.20 crores in the subject assessment year and proceeded to tax the entire amount of Rs.20 crores in the subject assessment year in the hands of all co-owners of shares. This resulted in the respondent assessee being taxed on her share of capital gain at Rs.4.48 crores after availing exemption u/s.54EC of the Act. Thus, the Assessing Officer computed the income at Rs.4.60 crores. In appeal CIT(A) deleted the addition of Rs.4.48 crores made by the Assessing Officer on the ground that it is notional. He noted that in terms of the agreement the respondent assessee alongwith other co-owners of shares of M/s. Unisol were to receive Rs.2.70 crores as initial consideration. The respondent assessee had offered her share out of Rs.2.70 crores received as initial consideration to tax in her return of income for the said assessment year. The CIT(A) further observed that the agreement dated 25-01-2006 also provided for deferred consideration which was capped at Rs.20 crores which had to be paid in terms of formula prescribed in the agreement dated 25-01-2006. Working out of the formula led to a situation where no amount on account of deferred consideration for the sale of shares was receivable by the respondent assessee in the immediate succeeding assessment year, i.e. A.Y. 2007-08. The CIT(A) concluded that no amount of the deferred consideration can be brought to tax in the said assessment year either on receipt basis or on accrual basis. Thus, he deleted the addition. The Revenue preferred an appeal before the Tribunal. The Tribunal upheld the action of the 31 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 Assessing Officer holding that as there is no certainty of receiving any amount as deferred consideration, the bringing to tax the maximum amount of Rs.20 crores provided as a cap on the consideration in the agreement dated 25-01-2006 is not tenable. The Tribunal further held that what has to be brought to tax is the amount which has been received and/ or accrued to the assessee and not any notional or hypothetical income as the revenue is seeking to tax the respondent assessee in the said assessment year 2006-07. The Hon'ble High Court before deciding the issue referred to the various clauses of the said agreement and thereafter dismissed the appeal filed by the revenue. The relevant observation of Hon'ble High Court form Para 7 onwards read as under :
"7. Mr.Pinto, learned counsel for the Revenue urged that in terms of section 45(1) of the Act that transfer of capital asset would attract the capital gains tax. It is further submitted that the amount to be taxed under section 45(1) is not dependent upon the receipt of the consideration. In support of the above he invites our attention to Section 45(1)(A) and section 45(5) of the Act which in contrast brings to tax capital gains on amount received. In the above view, it is his submission that the Assessing Officer was justified in bringing to tax entire amount of the respondent-assessee's share in Rs.20 crores referred to in the agreement dated 25th January, 2006 as maximum amount that could be received on the sale of shares in M/s. Unisol by its co-owners from M/s. RKHS.
8. In the present case, from the reading of the above clauses of the agreement the deferred consideration is payable over a period of four years i.e. 2006-07, 2007-08, 2008-09 and 2009-10. Further the formula prescribed in the agreement itself makes it clear that the deferred consideration to be received by the respondent-assessee in the four years would be dependent upon the profits made by M/s. Unisol in each of the years. Thus in case M/s. Unisol does not make net profit in terms of the formula for the year under consideration for payment of deferred consideration then no amount would be payable to the respondent-assessee as deferred consideration. The consideration of Rs.20 crores is not an assured consideration to be received by the Shete family. It is only the maximum that could be received. Therefore it is not a case where any consideration out of Rs.20 crores or part thereof (after reducing Rs.2.70 crores) has been received or has accrued to the respondent-assessee. As observed by the Apex Court in Morvi Industries Ltd. vs. CIT (1971) 82 ITR 835. "The income can be said to accrue when it becomes due.... The moment the income accrues, the assessee gets vested right to claim that amount, even though not immediately." In fact the application of formula in the agreement dated 25th January, 2006 itself makes the amount which is receivable as deferred consideration contingent upon the profits of M/s.Unisol and not an ascertained amount. Thus in the subject assessment year no 32 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 right to claim any particular amount gets vested in the hands of the respondent-assessee. Therefore, entire amount of Rs.20 crores which is sought to be taxed by the Assessing Officer is not the amount which has accrued to the respondent-assessee. The test of accrual is whether there is a right to receive the amount though later and such right is legally enforceable. In fact as observed by the Supreme Court in E.D. Sassoon & Co. Ltd. Vs. CIT (1954) 26 ITR 27 "It is clear therefore that income may accrue to an assesee without the actual receipt of the same. If the assessee acquires a right to receive the income, the income can be said to have accrued to him though it may be received later on its being ascertained. The basic conception is that he must have acquired a right to receive the income. There must be a debt owed to him by somebody. There must be as is otherwise expressed debitum in presenti, solvendum in futuro .... .... ....". In this case all the co-owners of the shares of M/s.Unisol have no right in the subject assessment year to receive Rs.20 crores but that is the maximum which could be received by them. This amount which could be received as deferred consideration is dependent/contingent upon certain uncertain events, therefore, it cannot be said to have accrued to the respondent-assessee. The Tribunal in the impugned order has correctly held that what has to be taxed is the amount received or accrued and not any notional or hypothetical income. As observed by the Apex Court in Commissioner of Income-Tax vs. M/s. Shoorji Vallabdas and Co. (1962) 46 ITR 144 "Income-Tax is a levy on income. No doubt, the Income-Tax Act takes into account two points of time at which liability to tax is attracted, viz., the accrual of its income or its receipt; but the substance of the matter is income, if income does not result, there cannot be a tax, even though in book-keeping an entry is made about a hypothetical income, which does not materialize." In this case Rs.20 crores cap in the agreement is not income in the subject assessment year. It has been observed by the Apex Court in the case of K.P. Varghese vs. Income-Tax Officer, Ernakulam & Anr. 181 ITR Page 597 that one has to read capital gain provision along with computation provision and the starting point of the computation is "the full value of the consideration received or accruing". In this case the amount of Rs.20 crores is neither received nor it has accrued to the respondent-assessee during the subject assessment year. We are informed that for the subsequent assessment year (save Assessment Year 2007-08 for which there is no deferred consideration on application of formula), the Assessee has offered to tax the amounts which have been received on the application of formula provided in the agreement dated 25th January, 2006 pertaining to the transfer of shares.
9. The contention of the Revenue that the impugned order is seeking to tax the amount on receipt basis by not having brought it to tax in the subject assessment year, is not correct. This for the reason, that the amounts to be received as deferred consideration under the agreement could not be subjected to tax in the assessment year 2006- 07 as the same has not accrued during the year. As pointed out above, accrual would be a right to receive the amount and the respondent- assessee alongwith its co-owners have not under the agreement dated 25th January, 2006 obtained a right to receive Rs.20 crores or any specified part thereof in the subject assessment year.33
ITA No.1310, 1485,748, 749 & 933 /PUN/2013
10. In the above view there could be no occasion to bring the maximum amount of Rs. 20 crores, which could be received as deferred consideration to tax in the subject assessment year as it had not accrued to the respondent-assessee.
11. We find that both the Commissioner of Income-Tax (Appeals) and the Tribunal have in view of the clear clauses of agreement dated 25th January, 2006 have in the facts of the present case correctly held that the respondent-assessee and the co-owners of the shares did not have a right to receive Rs.20 crores in the subject assessment year.
12. In the above view, in the present facts the question of law as framed does not give rise to any substantial question of law. Accordingly, appeal is dismissed. No order as to costs."
44. We find the Hon'ble Supreme Court in the case of CIT Vs. Hindustan Housing and Land Development Trust Ltd. has observed as under :
"The question raised in this appeal is limited to the point whether, on the facts and circumstances of the case, the Revenue can claim that the sum of Rs. 7,24,914 payable to the assessee as compensation can be said to have accrued to it as income during the previous year ended March 31, 1956, relevant to the assessment year 1956-57. As long ago as E. D. Sassoon & Co. v. CIT (1954] 26 ITR 27 (SC), this court considered the question as to the point at which income could be said to accrue or arise to an asses see for the purpose of the Indian Income-tax Act. In the majority judgment delivered by N. H. Bhagwati J., it was explained that the words " arising or accruing " describe a right to receive profits, and that there must be a debt owed by somebody. "
Unless and until there is created in favour of the assessee a debt due by somebody ", it was observed, "it cannot be said that he has acquired a right to receive the income or the income has accrued to him ". In the present case, although the award was made by the arbitrator on July 29, 1955, enhancing the amount of compensation payable to the assessee, the entire amount was in dispute in the appeal filed by the State Government. Indeed, the dispute was regarded by the court as real and substantial, because the assessee was not permitted to withdraw the sum of Rs. 7,36,691 deposited by the State Government on April 25, 1956, without furnishing a security bond for refunding the amount in the event of the appeal being allowed. There was no absolute right to receive the amount at that stage. If the appeal was allowed in its entirety, the right to payment of the enhanced compensation would have fallen altogether. This is a case which must be distinguished from that decided by this court in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC), where the liability to sales tax arose immediately on a dealer effecting sales which were subject to sales tax and what remained to be done was a mere quantification of that liability. The case compares rather with CIT v. Jai Prakash Om Parkash Co. Ltd. [1961] 41 ITR 718 (Punj). The very foundation of the claim made by the assessee was in serious jeopardy and nothing would be due if the appeal was decided against the assessee. Our attention has been drawn by the Revenue to Pope The King Match Factory v. CIT [1963] 50 ITR 495 (Mad). That case, however, proceeded on the basis that excise duty was payable and its quantification alone remained to be decided in the appeal. We may point out that the Andhra Pradesh High Court, dealing 34 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 with the taxability of compensation received under the Land Acquisition Act in Khan Bahadur Ahmed Alladin & Sons v. CIT [1969] 74 ITR 651 (AP), held that when land was taken over by the Government, the right of the owner to compensation was an inchoate right until the compensation had been actually determined and had become payable. It was observed that the enhanced compensation accrued to an assessee only when the court accepted the claim and not when the land was taken over by the Government. Examining the question whether income could be said to have accrued to the assessee on the date when possession of the land was taken by the Government for the purpose of assessment to tax in the year of assessment, P. Jaganmohan Reddy C.J., speaking for the court, said (pp. 657, 658);
" If the actual amount of compensation has not been fixed, no income could accrue to him. It cannot be contended that the mere claim by the assessee, after taking of possession, at a particular rate or for a certain sum is the compensation. It is the amount actually awarded by the collector or subsequently decreed by the court which accrues to him, and the respective amounts, whether awarded by the collector or the court accrue on the respective dates on which the award or the decree is passed. Income-tax is not levied on a mere right to receive compensation; there must be something tangible, something in the nature of a debt, something in the nature of an obligation to pay an ascertained amount. Till such time, no income can be said to have accrued ...... On the date when the collector awarded the compensation, it is only that amount which had accrued or was deemed to accrue, whether in fact paid or not. But by no stretch of the words in section 4(1)(b)(i), could it be said that the right to enhanced compensation, which has not yet been accepted by the proper forum, namely, the court, has also become payable on the date when the original compensation became payable, for being included in that year of assessment. The enhanced compensation accrues only when it becomes payable, i.e., when the court accepts the claim. As has been stated earlier, a mere claim by the assessee, after taking of possession of the land, at a particular rate or for a certain sum is not compensation. It must not be forgotten that, even if a court has awarded enhanced compensation, there is a right of appeal by the Government to the High Court, and the High Court may either disallow that claim or reduce the compensation. As against that judgment, there is a further right of appeal to the Supreme Court. The assessee also can appeal against the insufficiency of the enhanced compensation. Can it be said that the final determination by the highest court of the compensation would entitle the Income-tax Officer, notwithstanding the period of limitation fixed under the Income-tax Act, to reopen the assessment in which he had included the initial compensation awarded by the Collector and recompute the entire income on the basis of the final compensation? We do not think there can be any justification for such a proposition. On a proper construction of the terms 'accrue' or 'arise', we are of the view that such an interpretation cannot be placed. The interpretation given by us does not affect the interests of the Revenue. At the same time, it safeguards the assessee and prevents harassment. To hold otherwise would be contrary to the provisions of law."
"The legal position was explained in further detail by the Gujarat High Court in Topandas Kundanmal v. CIT [1978] 114 ITR 237. The High Court was called upon to decide whether the right to receive the enhanced compensation under the Land Acquisition Act accrued or arose to the assessee when be sought a reference under section 18 of 35 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 the Act or when the award was made by the Civil judge although an appeal was pending against that award. The learned judges referred to the nature of an award made by the Collector, and adverting to the opinion of this court in Raja Harish Chandra Raj Singh v. Deputy Land Acquisition Officer [1962] 1 SCR 676 ; AIR 1961 SC 1500, that the award made by the Collector was merely an offer or tender of the compensation determined by the Col lector to the owner of the property on the acquisition, the High Court observed (p. 247 of 114 ITR):
" ........... the legal position which emerges is that there is no liability in praesenti to pay an enhanced compensation till it is judicially determined by the final court since the entire question, namely, whether the offer made by the Land Acquisition Officer is inadequate and the claimant is entitled to an additional compensation and if yes, at what rate is in flux till the question is set at rest finally, we do not think that any enforce able right to a particular amount of compensation arises. The offer made by the Land Acquisition Officer, by his award, if not accepted by a claimant would not result automatically in a liability to pay additional compensation as claimed by a party aggrieved. There is no doubt a liability to pay a compensation as offered by the Land Acquisition Officer. Bat that is far from saying that that liability is a liability to pay additional compensation or enhanced compensation as claimed by a party aggrieved. If there is an existing liability, the mere fact that the payment is postponed to the future would not detract that liability from becoming a debt but the liability to pay unliquidated damages or additional compensation which are inchoate or contingent would not create a debt."
Khan Bahadur Ahmed Alladin & Sons [1969] 74 ITR 651 (AP) and Topandas Kundanmal [1978] 114 ITR 237 (Guj) were relied on by the Gujarat High Court in Addl. CIT v. New Jehangir Vakil Mills Co. Ltd. [1979] 117 ITR 849 for reaffirming that it was on the final determination of the amount of compensation that the right to such income in the nature of compensation would arise or accrue and till then there was no liability in praesenti in respect of the additional amount of compensation claimed by the owner of the land.
It is unnecessary to refer to all the cases cited before us. It is sufficient to point out that there is a clear distinction between cases such as the present one, where the right to receive payment is in dispute and it is not a question of merely quantifying the amount to be received, and cases where the right to receive payment is admitted and the quantification only of the amount payable is left to be determined in accordance with settled or accepted principles. We are of the opinion that the High Court is right in the view taken by it and, therefore, this appeal must be dismissed.
The appeal is dismissed. There is no order as to costs."
45. We find from the Maharashtra Regional and Town Planning Act, 1966 that for the purpose of development of a Special Township, the area required is on contiguous unbroken and uninterrupted area of not less than 100 acres at one place. Admittedly, from the copy of the sale deed the 36 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 assessee and the co-owners were having only 70 acres of contiguous land and they had agreed to arrange the balance land and also to deliver a legal and practical 24 metres access road to the contiguous 108 acres of the land. Since vendors and the consenting parties require time to fulfil the various obligations contained in the sale deed it was agreed by and between the parties that the purchaser shall pay 50% of the total consideration at the time of execution of the sale deed and the balance 50% consideration to be paid by the purchaser within 30 days upon the vendors and the consenting parties complying in entirety their obligation as enumerated.
46. It has been held in various decisions that the terms and conditions of an agreement has to be read as a whole and it cannot be read in piece- meal. The Hon'ble Supreme Court in the case of Mangalore Ganesh Beedi Works Vs. CIT reported in 378 ITR 640 (SC) held that the revenue cannot re-write the agreement for bringing the entire consideration to tax. The relevant observation of the Hon'ble Supreme Court reads as under :
"33. In this context, it may also be mentioned that by denying that the trademarks were auctioned to the highest bidder, the Revenue is actually seeking to re-write clause 16 of the agreement between the erstwhile partners of MGBW. This clause specifically states that the going concern and all the trademarks used in the course of the said business by the said firm and under which the business of the partnership is carried on shall vest in and belong to the highest bidder. Under the circumstances, it is difficult to appreciate how it could be concluded by the Revenue that the trademarks were not auctioned off and only the goodwill in the erstwhile firm was auctioned off. In D. S. Bist & Sons v. CIT11 it was held that the Act does not clothe the taxing authorities with any power or jurisdiction to re-write the terms of the agreement arrived at between the parties with each other at arm's length and with no allegation of any collusion between them. 'The commercial expediency of the contract is to be adjudged by the contracting parties as to its terms."
47. In the instant case admittedly the assessee along with other co- owners was having land admeasuring 70 acres situated at Wagholi and was not having 108 acres of contiguous land that had been agreed upon to be 37 ITA No.1310, 1485,748, 749 & 933 /PUN/2013 sold at the relevant time. Further the sale deed contained certain obligations on the part of the assessee and the co-owners to be fulfilled and the assessee has received only 50% of the consideration during the impugned assessment year. We find from the letter addressed by Mr. Atul Chordia, Director of Wagholi Properties Pvt. Ltd., copy of which is placed at pages 41 to 44 of paper book No.III, that in response to notice u/s.226(3) for recovery of dues in case of the assessee, he has categorically stated that the balance amount of Rs.17.01 crores is payable only after fulfillment of certain conditions mentioned in the agreement. In our opinion, the contents of the agreement has to be read as a whole and the revenue cannot re-write the agreement. The various decisions relied on by CIT(A) in our opinion are distinguishable and not applicable to the facts of the present case. In all those cases, the right to receive the consideration has been postponed. However, in the instant case the right to receive the consideration is on fulfillment of certain obligations. Further, the assessee has offered the balance amount to tax in A.Y. 2014-15 as business income. In view of the above discussion and respectfully following the decisions cited above, we are of the considered opinion that assessee is liable to capital gain tax only on 50% of the consideration that has been received during the year. We, therefore, set aside the order of the CIT(A) and allow the grounds raised by the assessee.
48. The Ld. Counsel for the assessee at the time of hearing did not press ground of appeal No.4 for which the Ld. Departmental Representative has no objection. Accordingly, this ground by the assessee is dismissed as 'not pressed'.
38
ITA No.1310, 1485,748, 749 & 933 /PUN/2013 ITA No. 748/PUN/2013 - Deepak Laxman Kudale ITA No. 749/PUN/2013 - Neeraj Horticulturists Pvt. Ltd. ITA No. 933/PUN/2013 - Nupoora Developers Pvt. Ltd.
49. Identical grounds have been raised by the above assessees. For the sake of convenience, we reproduce the grounds of appeal raised in ITA No.748/PUN/2013 :
"1. On the facts and in the circumstances of the case and in law, the learned assessing officer erred making addition of capital gain of Rs. 9,90,20,875/- in respect of transfer of plot of land situated at Gat No. 1277 & 1278, Village Wagholi, Dist: Pune without appreciating the facts of the case in proper perspective. The appellant hereby prays that the addition may please be deleted.
2. On the facts and in the circumstances of the case and in law, learned assessing officer could not appreciate the following feature/facts of the transaction of sale of land and various obligations to be performed by the appellant and the co-owners a. That the transaction under consideration has two limbs -
i) sale of the plot of land situated at Gat no. 1277 and 1278, Village Wagholi, Dist: Pune at and for the consideration of Rs.
125.50 lacs against the transfer of the land under consideration and ii) the consideration of Rs. 125.50 lacs against the performance of various obligation mentioning clause no. iv of the sale deed dated 2nd May 2008.
b. The learned assessing officer fails to appreciate that the capital gain arising from the transfer of the land @ Rs. 125.50 lacs per acre is properly declared by the appellant and the balance 50% consideration was towards the performance of various obligation in terms of clause no. iv of the sale deed dated 2nd May 2008 was neither accrued nor received by the appellant. c. That the consideration of Rs.251 lakhs per acre was much more than the prevailing market value of the land and the said amount embedded the consideration of performance of various obligations.
The appellant hereby prays that the addition of Rs.9,90,20,875/- made on account of long term capital gain may please be deleted.
3. The appellant craves to add, to amend or to alter any of the above grounds of appeal."
50. After hearing both the sides, we find the above grounds are identical to the grounds of appeal No.2 &3 in ITA No.1310/PUN/2013. We have already decided the issue and the grounds raised by the assessee have been allowed. Following the same reasonings, the grounds by the above assessees are allowed.
39
ITA No.1310, 1485,748, 749 & 933 /PUN/2013
51. In the result, ITA No.1310/PUN/2013 filed by the Assessee is partly allowed. ITA No.1485/PUN/2013 filed by the Revenue is dismissed and ITA Nos. 748, 749 and 933/PUN/2013 filed by the respective assessees are allowed.
Pronounced in the open court on 09-01-2017.
Sd/- Sd/-
(VIKAS AWASTHY) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
पण
ु े Pune; दनांक Dated : 09 January, 2017
th
सतीश
आदे श क) *#त,ल!प अ-े!षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. The CIT(A), II, Pune
4. The CIT-II, Pune
5.
#वभागीय %त%न6ध, आयकर अपील य अ6धकरण, "B Bench" पुणे / DR, ITAT, "B Bench" Pune;
6. गाड@ फाईल / Guard file.
आदे शानस ु ार/ BY ORDER, //स या#पत %त / True Copy // // True Copy // सहायक रिज)*ार/ Assistant Registrar आयकर अपील य अ6धकरण, पुणे / ITAT, Pune