No addition u/s 50C of IT Act when Income from Project of Redevelopment determined under PGBP: ITAT [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Mumbai  bench ruled that no addition shall be made under Section 50C of the Income Tax Act, 1961 when income from project of redevelopment determined under profit and gains of business of profession ( PGBP ).

The Assessee Tirupati Developers is a partnership firm engaged in the business of builders and developers.After filing the return of income the assessee case was selected for scrutiny.

The case was selected for scrutiny for the reason that specific information was received from sub registrar office that the assessee has sold immovable property on 29.07.2017 for consideration of Rs.10,00,000/- whereas the market value of the said property is Rs.40,42,000.

After observing the value of property and submission of the assessee the assessing officer proceeded to make an addition under section 50C of the income tax act ( the Act ) for the difference of Rs.30,42,000.

Aggrieved by the order assesee filed an appeal before the CIT(A). The CIT(A) dismissed the appeal filed by the assessee . Thereafter the assessee  filed an appeal before the tribunal.

During the adjudication Zarna Chandwani, the counsel for assessee argued that  assessee is engaged in the business of builders and developers and declares the profit on sale of flats as income from business the provisions of section 50C of the Act are not applicable to the assessee.

Srinivas,  Department representatives supported the decision of assessing officers.

The tribunal observed that the The assessee entered into Agreement for Permanent Alternate Accommodation with the members of society and as per the terms of the agreement in case where the member is receiving additional space in the alternate accommodation, the member would pay a consideration to the assessee towards the additional space.

Further the bench observed that  in the case of Neelkamal Realtors and Erectors India (p) Ltd ( supra ) the jurisdictional High Court has held that the provisions of section 50 C of the act governs valuation of property to determine capital gains and has no application while determining profit and gains of business or profession

After analyzing the submission of both parties the bench comprising  Narender Kumar Choudhry ( Judicial Member ) and Ms Padmavathy S, ( Accountant Member ) determined that In assessee's case, the assessee being a Builder and Developer of property has offered the income from project of redevelopment under the head of and gains from business or profession following Project Completion Method and therefore the addition made by the assessing officer is not sustainable

To Read the full text of the Order CLICK HERE

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