ACIT v. Shree Dhootapapeshwar Ltd.
A.Ys. : 2001-02 and 2002-03.
Dated : 30-3-2009
S. 28, S. 45 — Gain arising on transfer of land held by the
assessee as its capital asset in lieu of 50% of the constructed areas to be
constructed by the developer at his own cost without any construction activity
to be carried on by the assessee is chargeable to tax as capital gains.
Facts :
The assessee company was engaged in the business of
manufacturing and trading in ayurvedic medicines. It was owner of land
acquired by it in 1936 on which it had constructed a factory for manufacturing
ayurvedic products. The land was held by it as a fixed asset and was
consistently shown as fixed asset in its accounts. The assessee had not
converted this land into its stock-in-trade. The development agreement entered
into by the assessee recorded that the assessee did not have the requisite
expertise and know-how to undertake the development of the said land. As per
the agreement, the assessee was to part with the land and in lieu thereof was
entitled to receive 50% of the constructed area without carrying out any task
of development. The assessee was not required to meet any of the expenses
towards construction of the buildings.
The AO noted that — (i) the agreement described the
assessee as the owner and the developer as the licensee; and (ii) under the
agreement the assessee was given absolute rights to sell all the residential
as well as commercial property developed and handed over by the developers at
whatever rate as per the prevalent market conditions. Considering these, the
AO charged the profit arising on transfer of land under the head ‘Income from
Business’.
The CIT(A) allowed the assessee’s appeal.
Aggrieved, the Revenue preferred an appeal to the Tribunal.
Held :
The Tribunal noted that CIT(A) has observed that (a) the
constructed area was to be shared amongst the parties; (b) the parties were
free to deal with their respective areas in the manner they thought fit; (c)
this was not a case where the parties by virtue of the agreement have decided
to share the profit from the project; (d) the assessee was to receive 50% of
the constructed area, irrespective of the cost of development incurred by the
developer.
On facts and having noted the observations of the CIT(A),
the Tribunal held that the agreement could not be regarded as a joint venture
and the constructed area received by the assessee was consideration for
transfer of land. The Tribunal agreed with the conclusion of the CIT(A) and
noted that the conclusion of the CIT(A) is supported by the following judicial
decisions :
(a) CIT v. Smt. Radha Bai, (272 ITR 265) (Del.)
(b) CIT v. B. K. Bhaumik, (245 ITR 614) (Del.)
(c) CIT v. Mohakampur Ice and Cold Storage, (281
ITR 354) (All.)
The appeal filed by the Revenue was dismissed.
