Income Tax Appellate Tribunal - Mumbai
Aangan Properties P.Ltd, Mumbai vs Ito 9(1)(1), Mumbai on 7 December, 2018
आयकर अपीलीय अधिकरण "A " न्यायपीठ मब
ुं ई में ।
IN THE INCOME TAX APPELLATE TRIBUNAL " A" BENCH, MUMBAI
श्री महावीर स हिं , न्याययक दस्य एविं श्री राजेश कुमार लेखा दस्य के मक्ष ।
BEFORE SRI MAHAVIR SINGH, JM AND SRI RAJESH KUMAR, AM
Aayakr ApIla saM . / ITA No. 3613/Mum/2017
(inaQa- a rNa baYa- / Assessment Year 2011-12)
Aangan Properties Private The Income Tax Officer,
Limited ward 9(1)(1),
C/62, Vibgyor Tower, 9th Vs. Aayakar Bhavan, M.K .
Floor, BKC, Near Citi Bank, Road, Mumbai-400 020
Bandra East, Mumbai -400 051
(ApIlaaqaI- / Appellant) .. (p`%yaqaaI- / Respondent)
स्थायी ले खा िं . / PAN No. AAACA6921D
Aayakr ApIla saM . / ITA No. 3614/Mum/2017
(inaQa- a rNa baYa- / Assessment Year 2011-12)
Aastiva Builders & Developers The Income Tax Officer,
Private Limited, ward 9(1)(1),
C/62, Vibgyor Tower, 9th Vs. Aayakar Bhavan, M.K.
Floor, BKC, Near Citi Bank, Road, Mumbai -400 020
Bandra East, Mumbai -400 051
(ApIlaaqaI- / Appellant) .. (p`%yaqaaI- / Respondent)
स्थायी ले खा िं . / PAN No. AADCA8254A
अपीलाथी की ओर े / Appellant by : Shri Nitesh Joshi, AR
प्रत्यथी की ओर े / Respondent by : Shri Satish Chandra Rajore, DR
न
ु वाई की तारीख / Date of hearing: 03-12-2018
घोषणा की तारीख / Date of pronouncement : 07-12-2018
AadoSa / O R D E R
2
ITA No . 3 6 13 & 3 6 14 / Mu m / 20 1 7
महावीर स हिं , न्याययक दस्य/
PER MAHAVIR SINGH, JM:
These appeals by two different assessee are arising out of the orders of Commissioner of Income Tax (Appeals)-20, Mumbai [in short CIT(A)], in appeal Nos. CIT(A)-20/ITO-9(1)(1)/IT-139 & 140/2013-14 vide even date 28.02.2017. The Assessments were framed by the Income Tax Officer-Ward 9(1)(1), Mumbai (in short 'ITO/ AO') for the A.Y. 2011-12 vide orders of even date 28.02.2014 under section 143(3) of the Income Tax Act, 1961 (hereinafter 'the Act').
2. The first issue in this appeal of assessee in ITA No. 3613/Mum/2017 for AY 2011-12 is against the order of CIT(A) making addition on the ground that the assessee is co-owner of the project wherein it has 14% right and interest in the entire project and according to him, the assessee should have earned 14% of the entire sale consideration realized on sale of units rather than actual sale consideration realized. For this assessee has raised the following ground No. 1: -
"1. The learned Commissioner of Income-tax (Appeals) erred in upholding the action of the learned Assessing Officer iii making an addition of a sum of Rs.6662,620/- on the ground that the appellant is a co-owner of the project wherein it has 14% right and interest in the entire project and the appellant should have earned 14% of the entire sale consideration realized on sale of all units rather than actual sale consideration realized I by the appellant on the sale of units which Were allocated to the 3 ITA No . 3 6 13 & 3 6 14 / Mu m / 20 1 7 appellant in pursuance of Deed of Declaration dated 02/02/2008."
3. Briefly stated facts are that the assessee is carrying on the business of real estate & development/construction of property. The assessee undertook a project of construction of 13 storey building known as H&M towers, situated at Bandra West, Mumbai along with four other co-owners. The assessee is one of the joint developer and co-owner of this project having 14% of share along with other co-owners as under: -
"1. Arti Deepak Kothari 29%
2. Hemani Vinod Gowani 29%
3. Aangan Properties Pvt. Ltd. 14%
4. Aastiva Builders & Developers Pvt. Ltd 14%
5. Shilpi Property Developers (Bombay) Pvt. Ltd. 14%"
4. The assessee before assessing officer claimed that each co-owner has been allotted interest in the built up areas in proportion to their percentage in their building and construction in view of deed of declaration dated 02.02.2008. The assessee has been allowed certain units as its shares from the constructed property and the details of ownership rights and interest in the building which is enclosed at pages 6 & 7 of the assessee's paper book and the same read as under: -
Unit Name of Total Voting rights Share of respective owners No. the owner built up area Sq. Percentage ADK HVG AANGAN AASTITVA SHILPI mtrs
1. Arti 129.46 3.360524936 47.90608 Kothari 0.044641243 0.6363848 0.378602944 5.3971875 4 ITA No . 3 6 13 & 3 6 14 / Mu m / 20 1 7 Unit Name of Total Voting rights Share of respective owners No. the owner built up area Sq. Percentage ADK HVG AANGAN AASTITVA SHILPI mtrs 0.378602944 5.39718748 4.919012875 70.12316 Total 9.081384942 2 AANGAN 129.46 4.540409931 64.73 2 AASTITVA 4.540409931 64.73 Total 9.080819862 3 AANGAN 129.46 9.080989386 129.46 Total 9.080989386 4 AASTITVA 129.46 9.080989386 129.46 TOTAL 9.080989386 5 SHILPI 129.46 9.080989386 129.46 Total 9.080989386 6 Hemani V 129.46 9.080989386 129.46 Gowani Total 9.080989386 7 Hemani V 111.54 9.080989386 111.54 Gowani Total 9.080989386
8. Hemani V 47.62 1.712.754512 47.62 Gowani 9 Hemani V 129.46 9.080989386 129.46 Gowani Total 9.080989386 10 Arti 129.46 9.080989386 129.46 Kothari Total 0 11 Arti 129.46 16.56 129.46 Kothari Total 12 Arti 101.08 16.56 101.08 Kothari Total Total 1425.38 407.9061 418.71638 199.58719 199.587147 199.5832 % share of 29% 29% 14% 14% 14% each owner
5. The assessee also submitted the details of comparative chart of sale of units in the building, which is enclosed in assessee's paper book at page 8 and the same reads as under: -
Unit Total Built Amount Registration Rate per No. up Date sq. meters Sq.mtrs
1. 129.46 5,00,00,000 28/06/2010 3,86,220
2. 129.46 4,50,00,000 13.10.2008 3,47,598
3. 129.46 4,00,00,000 14/11/2008 3,08976 5 ITA No . 3 6 13 & 3 6 14 / Mu m / 20 1 7 Unit Total Built Amount Registration Rate per No. up Date sq. meters Sq.mtrs
4. 129.46 4,05,00,000 04/10/2008 3,12,838
5. 129.46 4,05,00,000 04/10/2008 3,12,838
6. 129.46 4,26,60,000 25/02/2008 3,29,523
7. 111.54 4,50,00,000 06/03/2009 4,03,443
8. 47.62 UNSOLD
9. 129.46 4,50,00,000 22/12/2008 3,47,598
10. 129.46 4,51,00,000 04/09/2008 3,48,370
11. 129.46 4,61,00,000 05/12/2009 3,56,095
12. 101.08 5,00,00,000 23/02/2011 4,94,658 Total 1425.38
6. The AO after going through these details noted that total consideration of the project including unsold stock is ₹ 50,89,08,000/- and for this he recorded the finding in Para 3.3 as under:-
"3.3 On perusal of these details, it is seen that the total saleable built up area of this project is 142538... sq.mtrs out of which area of 1377.76 sq.mtrs has been sold for total consideration of Rs.48,98,60,000/-. The Unsold stock of the project is 47.62 sq. mtrs.., the sale consideration receivable from the unsold stock is required to be considered to compute the total consideration of the project. It is seen that the latest tvo events of sale of unit at 13 th floor is occurred on 23.02.2011 @ ₹ 4,94,658/- per sq mtrs and another Unit at 2nd floor sold on 28.06.2010 @ ₹ 3,86,220/-. Considering the current scenario in the real estate market vis-à-vis location of the unit -8 i.e. 9th floor, the realizable value of the unsold stock is adopted at ₹ 4,00,000/- per sq. mtrs. Accordingly total sale consideration of the project is computed as under 6
ITA No . 3 6 13 & 3 6 14 / Mu m / 20 1 7 Total consideration received on account of sale of area 1377.76 sq. mtrs ₹ 48,98,60,000/-
Add: Consideration receivable of the unsold stock 47.62 x 400000 ₹ 1,90,48,000/-
Total consideration of the Project ₹ 50,89,08,000/-"
7. The AO noted that the assessee's right/ interest is oniy to the extent of 14%, whereas the assessee has disclosed its share of consideration of receipts at 12.69% of the total consideration of the project. According to AO, assessee's actual share of consideration receivable from the project is ₹ 7,12,47,120/- as against the disclosed consideration at ₹ 6,45,84,500/-. Therefore, the difference of ₹ 66,62,620/- was added to the total income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A).
8. The CIT(A) apart from confirming the action of the AO, directed the AO to exclude the profit of unsold unit from the income of the assessee for the current year but also directed to bring this income to tax in the hands of the assessee in the year in which these units are actually sold. For this the CIT(A) has observed at para 7.3 as under: -
"7.3 I have gone through the assessment order and submissions made in this regard. It is seen that the company is one of the joint developer and co- owner of the project situated at Bandra, Mumbai, having 14% share in the project as a co-owner along with other co-owners which are as under:
Sr. No. Name of co-owner percentage 7 ITA No . 3 6 13 & 3 6 14 / Mu m / 20 1 7
1. Arti Deepak Kothari 29%
2. Hemani Vinod Gowani 29%
3. Aangan Properties Pvt. Ltd. 14%
4. Aastiva Builders & Developers Pvt. Ltd 14%
5. Shilpi Property Developers (Bombay) Pvt. Ltd. 14%"
It was submitted by the assessee before the AO that each co-owner had been allotted interest in the built up areas in proportion of their percentage of share in the Building constructed on the above said property by virtue of deed of declaration. The assessee company has been allotted certain unit/units as its share from the constructed property. On perusal of the chart it transpires that the assessee had rights in the Units situated at 2n0 Floor, 3 Floor and 4th Floor. It is mentioned in the assessment order that the units allotted to the assessee were of lower value compared to the units at upper floors. The assessee was having rights of 14% in the total project and accordingly the assessee was eligible for its share of profits in the total project consideration. The consideration apportioned to the assessee did not match with its rights and interest of 14% in the project. The A.O. requested the assessee to explain as to why the addition should not be made to the total income after considering the total saleable value of the project. The explanation furnished by the assessee 8 ITA No . 3 6 13 & 3 6 14 / Mu m / 20 1 7 was duly considered but the same was not found to be acceptable nor tenable. Hence, the A.O. made an addition of t 66,62,620/- to the total income of the assessee. It is seen that the AO has rightly noted that the assessee had 14% share in the property where as per the details on record the company had received only 12.69% in the distribution of profit, whereas the assessee had claimed 14% of the expenses in its books. It is noted that the assessee has not shown the full profit accrued to it as per its share in the project which is 14%. The working of the 40 in bringing to tax 14% of the project receipts in the hands of the assessee is found to be correct and the same is upheld. However there is merit in the alternate ground of the assessee that profit of unsold units cannot be brought to tax till the time of realization of money from sale of such units.
Accordingly, the AO is directed to exclude the profit of unsold units from the income of the assessee for the current year and bring this income to tax in the hands of the assessee in the year in which these units are actually sold. Accordingly these grounds of appeal are partly allowed."
Aggrieved, now assessee is in second appeal before Tribunal.
9. We have heard rival contentions and gone through the facts and circumstances of the case. We find from the facts of the case and the arguments of both the sides and material available on cash, records including assessee's paper book consisting of pages from 1 to 136. The facts are that the assessee has undertaken a project for consideration of building known as H&M Tower, Bandra West, Mumbai. The assessee 9 ITA No . 3 6 13 & 3 6 14 / Mu m / 20 1 7 has one of the co-owner of the joint developers of the building holding rights in the unit aggregating to 14%. The assessee entered into a Deed of Declaration dated 02/02/2008 wherein each co-owner has been allotted interest in the build-up area in proportion of their percentage of shareholding in the building to be constructed. It is a fact that the assessee has been allotted right and interest in certain unit/units aggregating to 14%. The details of co-owner's right and interest in the units are enclosed in assessee's paper book at pages 6 & 7 and we have also reproduced above in para 4 pages 3 & 4 of this order.
10. In view of the above, before us Ld Counsel filed the details of assessee's right and interest in the units allotted as per the Deed of Declaration dated 02/0212008, which are as under: -
Unit No. Location of Unit Total Build-up area % of share (sq.mt) (Sq. mt)
1. 2nd floor 129.46 5.40
2. 3rd floor 129.46 64.73
3. 4th floor 129.46 129.46 Total 199.59 The appellant has sold the above units and income there from have bene shown as under: -
Unit No. Area in Sq. mt. Year of sale Consideration (₹) 1 5.40 2010-11 20,84,500 2 64.73 2008-09 2,25,00,000
3. 129.46 2008-09 4,00,00,000 Actual sale consideration is ₹ 4,05,00,000/-
Total 6,45,84,500
11. The assessee explained the entire position by filing the details before the AO and CIT(A) and even now before us. It was explained before us that during the course of assessment proceedings the AO asked to explain as to why the addition should not be made in its case as it is appearing that the units allotted to the assessee are on lower floors i.e. lower values compared to the units at upper floors. In reply, It was explained that the assessee is having rights of 14% in total project and 10 ITA No . 3 6 13 & 3 6 14 / Mu m / 20 1 7 accordingly it is eligible for 14% share of entire sale consideration of the project. The also furnished the details of comparative chart of sale consideration of all units during the course of assessment as well as appellate proceedings. These are reproduced in the order in above para 5 at page 4. We find from the facts of the case that the AO and CIT(A), based on the above chart came the conclusion that the assessee should have considered 14% income of the total consideration realized on sale of all units. According to revenue, the assessee has shown less income on sale of units allotted which are at lower floors compared to sale consideration of upper floors and accordingly allocated 14% of entire sale consideration realized on sale of all units to determine the share of the assessee in the entire project.
12. We have gone through entire facts and noted that the action of the AO in allocating 14% total consideration realized on sale of all the units of the project is wrong and contrary to the Deed of Declaration dated 02/02/2008 entered into by the assessee with other co-owners. We are of the view that factually once the units have been allotted to each co-
owners, it is upto each co-owner to decide at which price, at which time or at which such other conditions it want to sell its allocated units and that would be relevant to determine its share of profit on sale of its units. The sale consideration realized by other co-owners cannot be taken into consideration to arrive at its profits on sale of units. We also asked the Ld Counsel for the assessee, whether the sale considerations realized by the other co- owners on sale of their allotted units have been included in computing their income he answered the same that might have been included but was not aware about the same. We find that the sale consideration realized during the current year is only Rs.20,84,500/- but the AO has made the additions in respect of sales made during the 11 ITA No . 3 6 13 & 3 6 14 / Mu m / 20 1 7 earlier assessment years by the co-owners and such addition made by the AO amount to double taxation in the hands of co-owners in earlier years upon actual sales made by them and in the hands of the assessee in the current year without any basis and is unwarranted.
13. We are of the view that on actual basis none of the co-owner would share their income with the assessee as intended to be done by the AO. Accordingly, we are of the view that as per Deed of Declaration dated 02/02/2008, the share of each co-owner in each unit is pre- decided mutually and agreed by all and same will determine profitability on sale of such units. We are of the view that the very basis adopted by the AO is without any basis and also not practical. One co-owner may be willing to sell the unit at available price whereas the other would be willing to hold on to get a better price and that is dependent on the risk appetite of the seller and their financial stability to negotiate the deal. This could result into conflicts between the co-owners. To avoid the same and to have ease in sale of units and its procedures on sale, all co-owners decided mutually to allocate units within themselves in such a manner that each would receive their proportion of share in the total build up area and have complete authority to decide the sale of units allocated to them, the price and the time etc.
14. We also find from the facts of the case that assessee had sold unit no.2 and 4 for a total sale consideration of Rs 4,50,00,000/- and ₹ 4,05,00,000/- respectively during the financial year 2008-09 i.e. relevant to assessment year 2009-10. The assessment for assessment year 2009-10 was completed and the returned income of the assessee has been accepted by the department. Hence, we delete the addition made by AO and confirmed by CIT(A). This issue of assessee's appeal is allowed.
12ITA No . 3 6 13 & 3 6 14 / Mu m / 20 1 7
15. The next issue in ITA No. 3613/Mum/2017 for AY 2011-12 of assessee's appeal is as regards to the order of CIT(A) confirming the action of the AO in directing the AO to make addition of 14% share in the unsold units in the income of the assessee in the year in which such unit is actually sold. For this assessee has raised the following ground No.2: -
"2. The learned Commissioner of Income-tax (Appeals) erred in holding that the 14% share in unsold units of the project of Rs.2646,720/- to be added to the income of the appellant in the year in which such unit is actually sold. The appellant submits that the learned Commissioner of Income- tax (Appeals) failed to appreciate that the appellant does not have any right or interest in the unsold unit as per Deed of Declaration dated 02/02/2008."
16. We find from the observations of the CIT(A) that he has directed the AO to exclude the profit of unsold units from the income of the assessee from the current year and bring this income to tax in the hands of the assessee in the year in which these units are actually sold to the extent 14% of his share. We have already adjudicated the issue that profit to the extent of actual profit on the share of sale of unsold unit relating to assessee only which are assigned as per deed of declaration dated 02.02.2008 can be taken into consideration. In case these flats are not relating to assessee no addition can be made. This direction of CIT(A) is accordingly modified.
17. The next issue in ITA No. 3613/Mum/2017 for AY 2011-12 of assessee's appeal is regarding double taxation raised by assessee vide following ground No.3: -
13ITA No . 3 6 13 & 3 6 14 / Mu m / 20 1 7 "3. Without prejudice to what is stated above, the appellant submits that the addition made and upheld by the learned Commissioner of Income-tax (Appeals) results into double taxation of the same income in the hands of the appellant and respective co-owners."
18. We have already answered this issue while adjudicating the first ground and hence, we need not to adjudicate again.
19. Issues in ITA No. 3614/Mum/2017 for AY 2011-12 are identical to ITA No. 3613/Mum/2017. Respectfully following the same, we direct the AO to delete the addition accordingly.
20. In the result, both, the appeals of the assessees' are partly allowed.
Order pronounced in the open court on 07-12-2018.
Sd/- Sd/-
(राजेश कुमार / RAJESH KUMAR) (महावीर स ह
िं /MAHAVIR SINGH)
(लेखा दस्य / ACCOUNTANT MEMBER) (न्याययक दस्य/ JUDICIAL MEMBER)
मुिंबई, ददनािंक/ Mumbai, Dated: 07-12-2018 सदीप सरकार, व.निजी सधिव / Sudip Sarkar, Sr.PS आदे श की प्रनिललपप अग्रेपिि/Copy of the Order forwarded to :
1. अपीलाथी / The Appellant
2. प्रत्यथी / The Respondent.
3. आयकर आयक् ु त(अपील) / The CIT(A)
4. आयकर आयक् ु त / CIT
5. ववभागीय प्रयतयनधि, आयकर अपीलीय अधिकरण, मुिंबई / DR, ITAT, Mumbai 14 ITA No . 3 6 13 & 3 6 14 / Mu m / 20 1 7
6. गार्ड फाईल / Guard file.
आदे शािसार/ BY ORDER, त्यावपत प्रयत //True Copy// उप/सहायक पुंजीकार (Asstt. Registrar) आयकर अपीलीय अधिकरण, मुिंबई / ITAT, Mumbai