COMMISSIONER OF INCOME TAX VII Vs. KARAN KHANDELWAL

JUDGEMENT

(1.) By this common judgment, we shall dispose of both the appeals referred above. ITA No.334/2009 is directed against the order dated 25.04.2008 passed by the Income Tax Appellate Tribunal (herein after referred to as the Tribunal?), dismissing ITA No.454/del/07 filed by the Revenue, in respect of assessment of the respondent Sh. Karan Khandelwal, for the assessment year 2003-04. ITA No.82/09 is directed against the order dated 09.05.2008 passed by the Tribunal dismissing the ITA No.2008/del/06 filed by the revenue in respect of the assessment of the respondent Sh. Sunil Bedi, for the assessment year 2003-04. The facts giving rise to filing of these appeals can be summarized as under:

(2.) A Company namely Span Properties Pvt. Ltd., was then formed by Sh. P.S. Khandelwal, his son Neeraj Khandelwal and Mrs. Sheela Khandelwal, and they held the entire share capital of that company. The aforesaid land measuring 5300 sq. yards was transferred to that company for a sum of Rs.20,60,000/-. The company (Span Properties Pvt. Ltd.) entered into a Memorandum of Understanding dated 19.12.2008 with Fashion Flare Pvt. Ltd. Vide this memorandum of Understanding, the time for performance of the original MOU dated 22.03.2000, between Prem Shanker Khandelwal (HUF) and Fashion Flare Pvt. Ltd was extended upto 31.03.2001. It was agreed between them that if the permission which the seller had sought from the Government for construction of a commercial building on the aforesaid land is granted then the entire shareholding of Span Properties Pvt. Ltd. shall be transferred to Fashion Flare Pvt. Ltd., and the parties shall comply with the terms and conditions of the MOU dated 22.03.2000. It was further agreed that in case necessary permission/license/approval of Government of Haryana is not given till 31.03.2001, the entire understanding shall be nullified and shall have no effect. In that case, the seller was obliged to refund the advance money, which it had received from the purchaser.

(3.) A Collaboration Agreement dated 15.07.2002 was then executed between Span Properties Pvt. Ltd. on one hand and Ajay Chaudhary and Smt. Savita on the other hand. It would be pertinent to note that Sh. Ajay Chaudhary was the same person through whom Fashion Flare Pvt. Ltd. had entered into the MOU dated 19.12.2008 with Span Properties Pvt. Ltd. Under the Collaboration Agreement, the Choudharys? were to pay Rs.1 crore 40 lakh to Span Properties Pvt. Ltd as security deposit. They agreed to construct a Central Air Conditioned Multistoried Building on the aforesaid land and transfer half of the built up area (2760 sq. feet) to Span Properties (Pvt.) Ltd. free of any cost. Before execution of this Collaboration Agreement, Span had already obtained permission from Town and Country Planning Department of Haryana for change of land used for development of the commercial building on the aforesaid land after paying a sum of Rs.46,32,031/- on account of conversion charges, Rs.27,34,375/- on account of additional conversion charges, Rs.64,47,656/- on account of external charges and Rs.11,76,875/- on account of internal development charges. This Collaboration Aagreement dated 15.07.2002 was terminated mutually vide letter dated 13.08.2002 from Span International Pvt. Ltd. to Sh. Ajay Chaudhary and Smt. Savita Chaudhary.