CIT Vs. M/s. Ansal Properties And Industries (Delhi High Court)
Post search investigation and during the course of proceedings, the statements of directors of VIPL was recorded – in the course of survey proceedings under Section 133A. In the course of statement, it was categorically admitted that sale consideration paid to the assessee was Rs.42 crores. It was further stated that the assessee had no stake in the property as all its rights were acquired, in the sale transaction by the VIPL through the agreement of 01.04.1995. VIPL asserted that it became the owner of the property and therefore, entitled to book and sell 40% of total built- up/saleable area. That was conveyed.
This Court notices that the AO found that the assessee was in dire need of funds to liquidate its borrowing as well as make important payments towards the ongoing projects. The proposed arrangement was, therefore, planned from tax point of view to defer tax liability that was otherwise to accrue. It was noticed that the assessee had received Rs.40 crores in 1995-96 and the balance was received by M/s. Ansal Buildwell Ltd. as interest free inter corporate deposit to be paid to APIL at a later date. This Court notices that the development and construction work in terms of the agreement was to be completed in a 7 year period failing which the assessee was at liberty to forfeit the amount. There was no term in the agreement which entitled the assessee to exercise any manner of control over the performance of this obligation – spelt out in clause 7. Therefore, the inference drawn by the AO and confirmed by the CIT(A) that the terms of the deposit as one for security was merely a camouflage or devise to postpone tax liability that was plainly staring in the assessee‟s face. This was also demonstrated by the fact that VIPL was under no circumstances entitled to claim refund of any part of the agreement which inter alia aimed over all development rights and the consequential rights to construct, let and collect consideration for the built-up space. The assessee could not claim any share in that nor control method or manner of execution. The device was created, i.e. of security deposit, to enable the assessee to successfully convey and postpone its tax liability which otherwise accrued in the order of execution in successive assessment years but for the seizure of notes which let the cat out of the bag, as it were. The Revenue would have continued to remain in the dark and eventually the assessee would not have paid any tax towards the amount which were plainly received as consideration. The note, in fact, admitted the correct position that the tax liability had to be postponed for business reasons.
