Marvel Infrabuild Private Limited Vs ITO (ITAT Bangalore Bench)
Section 28(iv) Finds ₹8.23 Crore Benefit Buried In Land—₹9.80 Crore Property Bought For ₹1.58 Crore Was A Non-Cash Perquisite
An old agreement reveals a much higher land value
The assessee, a real-estate developer, purchased land measuring approximately 1 acre & 20 guntas in Sy. No. 139, Channasandra Village, Bengaluru, from Shri K.V. Prashanth.
Under the registered sale deed dated 04.04.2013, the purchase consideration was recorded at ₹1,57,50,000.
The assessee also entered into joint development arrangements & paid Shri Prashanth an interest-free refundable security deposit of ₹8,93,50,000.
During a survey u/s 133A conducted on 20.09.2016, the Department found an earlier unregistered agreement dated 12.07.2012 concerning the same property. Under that agreement, Shri Prashanth had agreed to purchase the property from Ms. Jayamma & others for ₹9,80,10,000.
The agreement recorded that ₹2 crore had already been paid, while the balance was payable within 90 days after production of the property documents.
Seller’s statement supports the higher consideration
Shri Prashanth’s statement was recorded u/s 131. He confirmed that, apart from the consideration appearing in the registered instrument, he had paid substantial amounts to the original landowners & confirming parties.
He furnished details showing account-payee cheque payments of approximately ₹3.42 crore to Ms. Jayamma & others.
The AO therefore concluded that the property’s actual value was not the ₹1.58 crore appearing in the assessee’s sale deed. Comparing the value of ₹9.80 crore recorded in the impounded agreement with the assessee’s purchase consideration of ₹1.58 crore, the AO computed a benefit of ₹8,22,60,000.
Since the land was acquired in the course of the assessee’s real-estate business, the AO taxed the difference as a business benefit or perquisite u/s 28(iv).
Assessee says the larger amount resolved title disputes
The assessee explained that Shri Prashanth had originally agreed to purchase the property for ₹1.05 crore. Subsequently, several persons asserted ownership claims over the land.
According to the assessee, the unregistered agreement was prepared merely to record payments required to settle those competing claims. As Shri Prashanth lacked sufficient funds, the assessee advanced him the refundable security deposit of ₹8.94 crore to resolve the disputes & secure a commercially viable development opportunity.
The assessee also claimed that criminal proceedings concerning the title were still pending.
Alternatively, it contended that by advancing the deposit without interest for six years, it had forgone interest at 18% amounting to approximately ₹9.65 crore. On this basis, it argued that its effective land cost was actually around ₹11.60 crore, leaving no benefit capable of taxation.
The CIT(A), however, regarded the arrangement as a colourable device designed to suppress the actual value & confirmed the addition.
264-day delay condoned on medical grounds
The assessee’s appeal before the ITAT was delayed by 264 days. It explained that the company’s director suffered serious health problems, was hospitalised from February 2024 & underwent treatment for nearly eight months.
The explanation was supported by an affidavit & a medical certificate from the treating doctor. As the Revenue produced no evidence rebutting the medical circumstances, the ITAT found sufficient cause, condoned the delay & admitted the appeal.
Section 28(iv) then covered non-monetary benefits
The assessee relied upon Mahindra & Mahindra Ltd. v. CIT [2018] 404 ITR 1 (SC) to argue that section 28(iv), as applicable to AY 2014-15, covered only benefits or perquisites received in kind, not monetary transactions.
It contended that the impugned addition merely represented a numerical difference between two values & was therefore monetary in character.
The ITAT accepted the legal principle but rejected its application to the facts. The benefit received by the assessee was not cash or waiver of a monetary loan. It was the land itself, allegedly worth ₹9.80 crore, acquired for only ₹1.58 crore.
Thus, the subject matter of the benefit was an immovable property—a non-monetary benefit received in kind in the course of the assessee’s real-estate business.
The decision in Mahindra & Mahindra, which concerned waiver of a monetary liability, was therefore distinguishable.
The benefit was real—not a notional valuation exercise
The assessee argued that the AO had merely adopted an artificial market value without establishing any real benefit.
The Tribunal rejected this contention. The value of ₹9.80 crore did not arise from an ad hoc estimate or an external valuation. It came from the impounded agreement relating to the very same land & was supported by Shri Prashanth’s statement u/s 131.
Further, the assessee’s own alternative computation suggested an even higher effective land cost of approximately ₹11.60 crore after considering notional interest on the refundable deposit.
Accordingly, the addition represented a quantifiable business benefit supported by contemporaneous material, not a hypothetical value invented by the AO.
Revenue neutrality argument rejected
The assessee alternatively argued that if ₹8.23 crore was taxed u/s 28(iv), the same amount should correspondingly increase the cost of the land held as stock-in-trade. The enhanced project cost would then become deductible, making the exercise revenue neutral.
The ITAT rejected this plea. The assessee had not actually incurred the additional amount of ₹8.23 crore as cost.
A benefit taxable u/s 28(iv) & an expenditure forming part of the cost of stock-in-trade are distinct concepts. Only expenditure actually incurred could enter the project cost. A deemed business benefit could not automatically create a matching deduction of an amount never paid.
Decision
The ITAT held that the assessee acquired land valued at ₹9.80 crore for ₹1.58 crore, thereby receiving a real non-cash business benefit of ₹8,22,60,000.
Since the benefit arose in the form of land acquired in the course of the assessee’s real-estate business, section 28(iv), as applicable to AY 2014-15, was attracted.
The addition was confirmed & the assessee’s appeal was dismissed.
Cases Discussed
- Mahindra and Mahindra Ltd. v. CIT (Supreme Court), (2018) 404 ITR 1 (SC)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT BANGALORE
1. Marvel Infrabuild Private Limited, the appellant, has filed ITA No. 2206/Bangalore/2024 for assessment year 2014–15 against the appellate order dated 12 December 2023 passed by the National Faceless Appeal Centre, Delhi [learned CIT(A)]. By that order, the learned CIT(A) partly allowed the assessee’s appeal against the assessment order passed under section 143(3) of the Income-tax Act, 1961 by the Income Tax Officer, Ward 4(1)(3), Bangalore [learned Assessing Officer]. The assessee is aggrieved by the confirmation of the addition of ₹82,260,000 and has therefore filed the present appeal.
2. The limited issue is whether the assessee, having purchased land for ₹15,750,000, received a taxable benefit because an impounded, unregistered sale agreement between its seller, Mr. Prashanth K.V., and Ms. Jayamma and others showed the land’s value as ₹98,010,000. Relying on that agreement, the learned Assessing Officer added the differential amount under section 28(iv) of the Act.
3. The assessee is a company engaged in real estate development as a builder and developer. For the relevant assessment year, it filed its return of income on 3 September 2014, declaring total income of ₹4,281,040. The return was selected for scrutiny, and a notice under section 143(2) of the Act was issued on 28 August 2015.
4. The assessee, engaged in real estate business, purchased land measuring 1 acre and 20 guntas in Sy. No. 139 at Channasandra Village, Bengaluru, for ₹15,750,000. It also entered into joint development agreements with Mr. Prashanth K.V. and Mr. Chandariya. Under the agreement dated 6 April 2013, the assessee paid Mr. Prashanth K.V. an interest-free refundable security deposit of ₹89,350,000. Under a second agreement dated 8 August 2013, it paid ₹8,500,000 to Mr. Chandariya.
5. On 20 September 2016, a survey under section 133A of the Income-tax Act was conducted at the assessee’s business premises. During the survey, an agreement of sale dated 12 July 2012 was found and impounded for the same property. The agreement, executed between Shri Jayamma and seven others on one side and Mr. Prashanth K.V. on the other, recorded total consideration of ₹98,010,000. It stated that ₹20,000,000 had already been paid to Shri Jayamma and others as on the date of the agreement, with the balance of ₹78,010,000 payable within 90 days after all property documents were furnished. Mr. Prashanth K.V.’s statement was recorded under section 131 of the Act. In response to questions 4 and 5 on 28 September 2016, he confirmed that, apart from the sale consideration of ₹15,750,000 stated in the registered sale deed dated 11 February 2013, he had paid ₹44,000,000 to the landlords and confirming parties. In response to question 6, he provided payment details showing account-payee cheque payments of ₹34,151,000 to Shri Jayamma and others, whereas the agreement dated 12 July 2012 recorded payments of only ₹30,500,000. The learned Assessing Officer observed that the land transferred by Mr. Prashanth K.V. to the assessee was not valued at ₹15,750,000. He therefore issued a notice asking the assessee to explain why the cost of acquisition of the land measuring 1 acre and 20 guntas, purchased from Mr. Prashanth K.V., should not be adopted at ₹98,010,000 as reflected in the impounded sale agreement between Shri Martin J.M. and Mr. Prashanth K.V., and why the resulting difference should not be taxed under section 28(iv) of the Act.
6. In reply, the assessee stated that it purchased land measuring 1 acre and 20 guntas from Mr. Prashanth K.V. under a registered sale deed dated 4 April 2013 for ₹15,750,000. It also explained that it paid Mr. Prashanth K.V. ₹89,350,000 as an interest-free refundable security deposit.
7. The assessee submitted that Mr. Prashanth K.V. had agreed with Ms. Jayamma, others, and Shri Viswanath to purchase the property for ₹10,500,000 and subsequently agreed to sell it to the assessee for ₹15,750,000. He also undertook to address any future legal issues arising from the transaction. According to the assessee, after the agreement was executed, several persons asserted ownership claims over the property. To resolve those claims, Ms. Jayamma and Shri Viswanath executed a power of attorney dated 15 December 2012 in favour of Mr. Prashanth K.V., authorizing him to appear before the concerned authorities on their behalf. The assessee stated that Mr. Prashanth K.V. was required to pay ₹87,500,000 to the claimants in addition to the agreed sale consideration of ₹10,500,000 payable to Ms. Jayamma and Shri Viswanath, and that an unregistered agreement was prepared only to record those payments. Since Mr. Prashanth K.V. did not have sufficient funds, he approached the assessee, which advanced a refundable deposit of ₹89,350,000. The assessee further stated that criminal proceedings concerning the property title were still pending and that the interest-free refundable deposit was made to secure a commercially viable business opportunity. In the alternative, it contended that, by advancing the deposit without interest in 2013, it had forgone interest for six years at the prevailing market rate of 18%, amounting to ₹96,500,000. It therefore claimed that the effective cost of the land was ₹116,000,000 and that no benefit had accrued to it.
8. The learned Assessing Officer rejected the assessee’s explanation. He noted that the first agreement of sale dated 12 July 2012, executed by Mr. Prashanth K.V. with eight vendors, including Ms. Jayamma and Shri Viswanath, was drawn on stamp paper of ₹20,000, whereas the later registered sale deed named only three vendors. The first agreement recorded consideration of ₹98,010,000, while the registered sale deed reflected only ₹10,500,000. On this basis, he held that the actual consideration for transfer of the land was ₹98,010,000. He further observed that the assessee acquired 1 acre and 20 guntas of the same land from Mr. Prashanth K.V. under the sale deed dated 4 April 2013 for ₹15,750,000, though the unregistered agreement impounded during the survey showed that Mr. Prashanth K.V. had purchased it for ₹98,010,000. After verifying the facts by issuing summons to Mr. Prashanth K.V. under section 131 of the Income-tax Act, the learned Assessing Officer concluded that the assessee had obtained a benefit of ₹82,260,000 by acquiring the property below its actual value. He treated this amount as taxable under section 28(iv) of the Act as a business benefit or perquisite, added it to the assessee’s income, and assessed total income at ₹86,541,040 against the returned income of ₹4,281,040.
9. Aggrieved by the assessment order, the assessee appealed before the learned CIT(A) and restated the facts noted above. After examining the transaction as a whole, the learned CIT(A) held that the appellant had structured its arrangement with Mr. Prashanth K.V. as a colourable device to avoid the law by suppressing the actual market value. He also found that the alleged legal disputes and related issues were not genuine. Accordingly, he confirmed the addition of ₹82,216,000 in the assessee’s hands under section 28(iv) of the Act and dismissed the appeal on this ground.
10. Aggrieved by the order of the learned CIT(A), the assessee filed the present appeal with a delay of 264 days. As stated in Form No. 36, the assessee received the appellate order on 15 December 2023 but filed the appeal only on 23 December 2024. It sought condonation of delay, supported by an affidavit of the company’s director. The assessee explained that the director suffered from serious health issues and underwent prolonged hospital treatment after his condition deteriorated. He was admitted to hospital on 3 February 2024, and treatment continued for about eight months. According to the assessee, these unforeseen medical circumstances prevented timely preparation and filing of the appeal and supporting documents. It further stated that, once the director’s health improved and the order of the learned CIT(A) came to its notice, it made sincere efforts to file the appeal at the earliest opportunity, though operational delays in collecting documents and reviewing the facts also contributed to the delay. The assessee submitted that the delay was unintentional and bona fide, relying on a medical certificate dated 5 July 2024 issued by Dr. Dilip Kumar of Helina Lifecare Hospital, and requested that the delay be condoned. The learned authorized representative, Shri Veeresh Budati, Chartered Accountant, reiterated these facts and submitted that the director’s illness constituted sufficient cause for condoning the delay.
11. The learned Departmental Representative, Shri N.S. Sashidhara, opposed the request, arguing that the assessee had not shown sufficient cause for the delay in filing the appeal. He therefore submitted that the appeal should not be admitted and ought to be dismissed.
12. We have carefully considered the rival submissions. The appeal was filed with a delay of 264 days, which the assessee attributes to the company director’s ill health. This explanation is supported by an affidavit and a medical certificate from the treating doctor, and the Revenue has not produced any material to rebut it. We are therefore satisfied that the assessee had sufficient cause for the delay. As the delay appears bona fide, we condone it and admit the appeal.
13. The learned authorized representative, Shri Veeresh Budati, Chartered Accountant, submitted that, for assessment year 2014–15, section 28(iv) applied only to benefits or perquisites received in kind and not to monetary transactions. He argued that the alleged benefit represented only the difference between the purchase consideration paid by the appellant and the value adopted by the Assessing Officer and was therefore monetary in nature. Since the assessee had not received any benefit or perquisite in kind, section 28(iv) could not apply. In support, he relied on the decision of the Hon’ble Supreme Court in Mahindra and Mahindra Ltd. v. CIT (2018) 404 ITR 1 (SC). He further submitted that the Assessing Officer’s own quantification of the difference at ₹82,260,000 confirmed that the alleged benefit was monetary and outside the scope of section 28(iv). Referring to the amendment effective from 1 April 2020, under which benefits or perquisites received in cash, in kind, or partly in cash and partly in kind became taxable, he submitted that the amendment applies prospectively and not to assessment year 2014–15. He also contended that the Assessing Officer had not established that any real benefit accrued to the assessee, and that taxing a notional difference without a charging provision violated Article 265 of the Constitution. Alternatively, he argued that, even if the alleged difference were treated as taxable, it would correspondingly increase the cost of acquisition of the land. As the assessee is engaged in real estate development, the enhanced cost would form part of the project cost and be deductible while computing business profits, making the addition revenue neutral. He also stated that the deposit paid to Mr. Prashanth K.V. was returned in 2019 and referred to the occupancy certificate dated 14 October 2019. He therefore submitted that the addition made by the Assessing Officer should be deleted.
14. The learned Departmental Representative, Shri N.S. Sashidhara, CIT-DR, supported the orders of the lower authorities and submitted that the addition made by the Assessing Officer and confirmed by the learned CIT(A) should be upheld. He stated that Mr. Prashanth K.V. had purchased the land for ₹98,010,000 and had already paid ₹20,000,000, as confirmed by the seller in a statement recorded under section 131 of the Act. He further argued that the assessee’s own computation valued the land at ₹116,000,000 and that recording the same property at only ₹15,750,000 showed the transaction to be camouflaged. He relied on the learned CIT(A)’s finding that the arrangement was structured to avoid tax. As to the assessee’s reliance on the Hon’ble Supreme Court’s decision in Mahindra and Mahindra Ltd., he submitted that the facts were distinguishable because that case concerned cessation of liability, the transaction was genuine, and no such doubt arose there. By contrast, the assessee here acquired land worth ₹98,010,000 for only ₹15,750,000 and thereby obtained a clear business benefit by paying substantially less than its value. He therefore submitted that section 28(iv) applied to the benefit arising from business or profession and, relying on judicial precedents, urged that the orders of the lower authorities be confirmed.
15. We have carefully considered the rival submissions, examined the orders of the lower authorities, and reviewed the judicial precedents cited by both parties.
16. The provision relevant to this case is section 28(iv) of the Act. Section 28 charges the specified receipts to income tax under the head “Profits and gains of business or profession.” Clause (iv) taxes the value of any benefit or perquisite, whether or not convertible into money, arising from business or the exercise of a profession. Section 2(24) correspondingly includes such benefit or perquisite within the definition of “income.” Therefore, where an assessee carrying on business or a profession receives a quantifiable benefit or perquisite connected with that activity, its value is taxable as business income. The necessary conditions are that the assessee must carry on business or a profession, the benefit or perquisite must arise from that activity, and there must be a direct nexus between the benefit and the assessee’s business or profession.
17. The Hon’ble Supreme Court in Commissioner of Income-tax v. Mahindra and Mahindra Ltd. (supra) examined the scope of section 28(iv). In paragraph 13, it held that the provision applies only where the income arises from business or profession and the benefit received is non-monetary. Accordingly, section 28(iv) cannot be invoked when the assessee receives money, though such receipt may still be taxable under section 28 if it otherwise constitutes business income.
18. Applying this principle to the present facts, the assessee, a property developer, purchased land measuring 1 acre and 30 guntas from Mr. K.V. Prashanth under a registered sale deed dated 4 April 2013 for ₹15,750,000. During the survey conducted on 20 September 2016, an agreement dated 12 July 2012 was found, showing that Mr. K.V. Prashanth had agreed to purchase the same property from Ms. Jayamma and others for ₹98,010,000. The agreement recorded payment of ₹20,000,000 on execution, with the balance payable within 90 days after the property documents were furnished. In his statement under section 131 of the Act, Mr. K.V. Prashanth confirmed that he had paid ₹34,150,000 to Ms. Jayamma and others by account-payee cheques. It was later noticed that the registered sale deed reflected consideration of only ₹10,500,000. Considering the sale agreement value of ₹98,010,000, the assessee’s purchase price of ₹15,750,000 for the same land, and the assessee’s refundable deposit of ₹89,350,000 to Mr. K.V. Prashanth, the learned Assessing Officer invoked section 28(iv) of the Act and taxed the differential amount of ₹82,260,000 in the assessee company’s hands.
19. On these facts, we find that the assessee, being engaged in real estate business, obtained a benefit in the course of its business by acquiring land valued at ₹98,010,000 for a consideration of only ₹15,750,000, resulting in a benefit of ₹82,260,000. The benefit was admittedly not received in cash but in the form of land. We therefore find no infirmity in the orders of the lower authorities taxing ₹82,260,000 in the hands of the assessee by invoking section 28(iv) of the Act.
20. The assessee’s contention that it received no benefit or perquisite is without merit. The assessee acquired property valued at ₹98,010,000 for consideration of only ₹15,750,000. Its reliance on the Hon’ble Supreme Court’s decision in Mahindra and Mahindra Ltd. (2018) 404 ITR 1 (SC) is misplaced, as that case concerned waiver of a loan. In the present case, the assessee received property worth ₹98,010,000 after paying only ₹15,750,000, thereby obtaining a benefit of ₹82,260,000.
21. The assessee’s reliance on the amendment made by the Finance Act 2023 also does not assist its case. The provision, as applicable up to 1 April 2024, squarely covered the present transaction because the assessee received a benefit in the form of land acquired at a value lower than its real value.
22. The assessee’s next contention is that the Assessing Officer did not establish receipt of any real benefit and relied only on the alleged difference between the purchase consideration and the value adopted by him. This contention deserves to be rejected at the threshold. The Assessing Officer did not make an ad hoc valuation; he relied on material found during the survey, including an agreement showing the actual value of the land at ₹98,010,000. That value was also confirmed by Mr. Prashanth K.V. in his statement recorded under section 131 of the Act. Further, the assessee itself justified an even higher land cost of ₹116,021,275 at page 7 of the assessment order after considering interest on the refundable deposit paid to Mr. Prashanth K.V. The addition therefore represents taxation of a real benefit, not a notional amount.
23. The assessee’s second argument, based on Article 265 of the Constitution, is that no tax can be levied or collected except by authority of law and that section 28(iv) does not authorize taxation of monetary benefits. It therefore contended that the impugned addition lacked legal authority. We have considered this submission and reject it at the threshold. The assessee has not challenged the validity of section 28(iv). Further, the benefit received was not monetary; it was a real benefit in the form of land acquired for a lower consideration.
24. The assessee next argued that the addition would be neutral for revenue. According to it, since it is engaged in real estate development, any amount added under section 28(iv) would correspondingly increase the cost of acquisition of its stock-in-trade and should therefore be allowed as a deduction. We have considered this argument and rejected it. The assessee did not incur any corresponding cost for the land; the amount is taxable as income under section 28(iv) because the assessee enjoyed a non-cash benefit in the form of property. Only an actual cost incurred by the assessee can be allowed as a deduction. The benefit received and the cost incurred are distinct concepts. Therefore, this contention also has no merit.
25. In view of the above, we confirm the orders of the ld. Lower authorities, all grounds raised by the assessee are dismissed.
26. In the result, the assessee’s appeal is dismissed.
Order pronounced in the open court on 08th September, 2026.
