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consideration from Shri Umang Thakkar to owners Rs. 10,00,000 paid as follows: 

        4,00,000          D.D.No. 12625 dt. 11.09.03

        4,00,000          Cheque no. 058360 dt. 11.09.03 of Mahila Vikas co. op.
                          Bank Ltd.

        2,00,000          Cash dt. 11.09.03

The appellant capitalized the same in view of sub plot 526/1 & common plot for Hotel business.

(B) Agreement Dt. 13.02.04 between Shri Yogesh Bhavsar and appellant.

5.1.(A)(b) The assessee is dealing in real estate with group concerns of 'Dharmdev builders'. Shri Umang Thakkar being main person of such group and director of appellant company entered into various transactions of purchase of land of plot 526 from its various owners and subdivided the plot into sub plot 526/1, 526/2 and common plot as detailed in sale deed.

It is the sub plot 526/2 which was subject matter of sale to M/s SEWA, while other sub plot 526/1 and common plot kept by appellant for his hotel business. The purchase were made through various sale deed dt. 11.09.03 and 'Banakhat' for all these land including the plot no. 526/2 and the same is sold to M/s SEWA. These activities of purchase, plotting & sale is business activity hence the income so arised from this transaction has to be taxed under the head "Business income".

5.1.(A)(c) The actual cost for purchase of land as evidenced by sale deed dt. 11.09.03 is Rs. 26,16,000 only which was paid by appellant to owners in terms of "Banakhat" (which was neither submitted nor produced, but referred in sale deed). In reference to payment to various tenants, there are agreements (notarized) produced / submitted by appellant except in two case of M/s Malkeshwar Mahadev Trust and Shri Firoj. The examination of sale deed dt. 12.12.03 clearly reflect that appellant purchased land from different owners vide sale deed dt. 11.09.03 Regd. With nos, 3228 to 3241 (Fourteen in nos., not produced /submitted) related to land falling under subplot 526/1 and common plot. The payment made before 12.12.03 was duly capitalized by appellant because the land failing under subplot 526/1 and common plot were to be used by appellant for construction of Hotel. It is in this reference, all the tenants to whom appellant paid for vacating the premises were related to this plot of land and therefore no deduction can be allowed for such payment. The appellant failed to substantiate or demonstrate that any of such payment irrespective of paid in A.Y. 03-04 or A.Y. 04-05 is related to tenant for the plot (subplot) 526/2 which was sold to M/s SEWA. Therefore the cost of property is taken at Rs. 26,16,000, (Ellisbridge) P. Ltd. vs. ITO) A.Y.- 2004-05 - 21 -

23. It is, thus, found that the Ld. CIT(A) had critically examined the evidences brought on record by the assessee for payment made to the tenants and has given categorical finding in this regard in the appeal order. After examining the agreements, he had found that these documents pertained to Sub-Plot No.526/1 and the common plot of land which was retained by the assessee for his hotel business and that the payments made to the tenants was not in respect of plot No.526/2 which was sold to SEWA. In fact the assessee had capitalized the payment of Rs. 10 lakh made to Lucky Decorators to sub plot 526/1 & common plot for Hotel business. The other payments were in respect of eviction of tenants from their shops. In the sale deed there was no reference of any shop being in existence on the sub-plot No.- 526/2. From the sale deed dated 12.12.2003 it is found that Plot No.526/2 was sold without any encroachment thereon and the vacant possession of the property was given to the purchasers which is evident from Clause 31 of the sale deed which is reproduced below: