ITO Vs V Real Estate (India) Pvt Ltd (ITAT Mumbai)
In a recent ruling ITAT Mumbai dismissed appeal filed by the revenue and confirmed order of the CIT (A) in treating the income/compensation received from the transaction in agricultural land as business income instead of income from other sources as treated by the AO.
Assessee is a private limited company and is engaged in real estate development. It filed ITR for AY 2011-12 declaring loss at Rs. (-) 86,11,011/- which was accepted initially. Thereafter, the assessee filed a revised return, wherein the loss was reduced to Rs. (-) 21,11,000/-. The case was selected for scrutiny and assessee was asked to furnish the reasons for the revision of its return. In response, the assessee submitted it received Rs.65,00,000/- as compensation in lieu of cancellation of agreement in related to the sale of agricultural land as seller did not intend to execute the conveyance in favour of the assesse. It was agreed between the assessee and the seller that seller would make the title of the land absolutely clear and marketable. The total consideration of the land was Rs. 2,50,00,000/- in respect to agricultural land. The assessee submitted that the said compensation was received subsequent to 31.03.2011, but since the right of the assessee arose to the said compensation during the year ending 31.03.2011, relevant to A.Y. 2011-12, the said compensation was included in the return of income, and the assessee filed the revised return of income reducing the loss to Rs. (-) 21,11,000/-. AO observed that assessee vide agreement dated 17.09.2011 purchased the said for consideration of Rs. 2,03,00,000/- which was re-purchased for Rs. 2,50,00,000/- by executing a separate sale deed on the same date 17.09.2011 by the cancelling the previous deed. AO further observed that the action of the assessee in acquiring agricultural land is not permitted by its object according to its MOU. AO treated the aforesaid sale transactions of Rs.2,50,00,000/- entered into by the assessee in relation to agricultural land as income u/s 50C as fair market value and computed the gain of Rs.2,33,11,012/- on the sale of the properties and treated the same as income of the assessee under the head ‘income from other sources’ under section 56(1) of the Act. Further, AO added Rs.90,00,000/- in to the income of the assessee after observing the compensation amount was agreed between the parties, as per MOU, was Rs. 90,00,000/- not Rs.65,00,000/-.
