South Delhi Apartments Pvt. Lt. vs Commissioner Of Income Tax
2010 Latest Caselaw 4372 Del

*          IN THE HIGH COURT OF DELHI AT NEW DELHI

+                       ITA No.1168 of 2009

%                          Decision Delivered On: 17th September, 2010.


     SOUTH DELHI APARTMENTS PVT. LT.                          . . . Appellant

                        through :          Mr. Pankaj Jain with Mr. Rakesh
                                           Jain, Mr. Abhay Jain, Mr. Manish
                                           Chowdhry     and   Ms.    Namita
                                           Chowdhry, Advocates.

                              VERSUS


     COMMISSIONER OF INCOME TAX                             . . .Respondent

                        through:           Ms. Suruchi Aggarwal, Standing
                                           Counsel.

CORAM :-
    HON'BLE MR. JUSTICE A.K. SIKRI
    HON'BLE MR. JUSTICE MANMOHAN SINGH

     1.    Whether Reporters of Local newspapers may be allowed
           to see the Judgment?
     2.    To be referred to the Reporter or not?
     3.    Whether the Judgment should be reported in the Digest?


A.K. SIKRI, J. (ORAL)

1. We admit the appeal on the following questions of law and also

proceed to decide the same, as counsel for both the parties have

argued the matter finally at this stage itself.

"(1) Whether on the true and correct interpretation of the provisions of Section 254 of the Income Tax Act, the Tribunal has the powers to enhancement and which is beyond jurisdiction?

(2) Whether on the true and correct interpretation of Section 2(47) of the Income Tax Act, 1961, Section 5 of the Transfer of Property Act, 1882, the Registration of the property in the name of buyer determines the ownership and the title of the property for completing the "transfer"?

2. These questions fall for determination under the following

circumstances:

The appellant assessee, which is a private limited company

is carrying on the business of real estate since its incorporation. It

purchased the first floor of property No. S-302, Panchsheel Park,

New Delhi. Original owner of this property was one Shri Baljeet

Singh Malhotra. He entered into the collaboration agreement with

one Raj Infra Projects (P) Ltd. and under that agreement, this

property was constructed and developed. As per clause 2(b) of

the collaboration agreement dated 08.07.2002, the owner's

shares, i.e., Shri Baljeet Singh Malhotra is as under:

"Entire first floor and part of drive way as shown red in the site plan with 29%. Undivided and impartiable right in the land underneath."

3. Total construction which was carried out in the said property

consisted of ground floor, first floor, second floor and fourth floor

servant quarters. As mentioned above, out of these, the original

owner got entire floor and part of drive way. All four servant

quarters were the property of the developer. He sold the first

floor to Veera Builders (P) Ltd. for a sum of `75 lacs vide

agreement to sale dated 08.07.2002. In this agreement, there

was no reference to the servant quarters, obviously because he

was not having any share therein. Veera Builders (P) Ltd., in turn,

sold the said first floor without servant quarters to the assessee

for a sum of `92.50 lacs vide agreement to sale dated 31.03.2003.

The assessee company has sold this first floor again to Shri Pawan

Jain and Shri Devender Jain vide sale deed dated 05.12.2003.

However, in the said sale deed, there is a mention not only of the

first floor but of servant quarters as well. It was the case of the

assessee that as it had purchased only the first floor from Veera

Builders (P) Ltd. without servant quarters. One servant quarters

was in fact purchased by Raj Infra Projects (P) Ltd. @ `15 lacs.

4. The Assessing Officer (AO), treated the sale of servant quarters by

Raj Infra Projects (P) Ltd. in favour of the assessee as sham

transaction and made the addition of `15 lacs.

5. The CIT (A) after taking note of the fact and particularly that even

Raj Infra Projects (P) Ltd. had shown the said sale in its regular

books of account and the sum of `15 lacs was shown in the

audited books of account and income tax returns and the CIT (A)

came to the conclusion that it was not a sham transaction. He,

thus, directed the deletion of the said addition of `15 lacs made

by the AO.

6. The Department challenged this order of the CIT(A) before the

Income Tax Appellate Tribunal (hereinafter referred to as 'the

Tribunal'). The Tribunal has reversed that order of the CIT (A).

Though the Tribunal has not disputed the facts recorded by the

CIT (A), it has gone into altogether different direction in sustaining

the order of the AO and set aside the order of the CIT (A). What is

pointed out by the Tribunal is that the assessee had purchased

the servant quarters along with 4% right of the undivided land. In

the sale deed executed by it in favour of Shri Pawan Jain and Shri

Devender Jain, there was no transfer of interest of 4% in the

undivided land in favour of the said purchaser and the assessee

was not able to explain as to what happened to the right in the

aforesaid land.

7. Looking into this limited aspect on which the Revenue raised the

dispute, learned counsel for the appellant made the statement at

the bar that even if the sale deed did not specifically mention

about the 4% proprietary share in land pertaining to the said

servant quarters, the same was inadvertent. In order to see that

this issue is beyond the pale of controversy and undertaking is

filed before us that the appellant shall execute a supplementary

sale deed with regard to 4% share of the land in servant quarters

in favour of the buyer Shri Pawan Jain and Shri Devender Jain,

affidavit to this effect is also filed. This takes care of the

grievance of the Revenue.

8. In view of the above, order of the Tribunal is accordingly set aside

and that of the order of the CIT (A) is restored. This appeal is

disposed of in the aforesaid terms.

(A.K. SIKRI) JUDGE

(MANMOHAN SINGH) JUDGE SEPTEMBER 17, 2010 pmc