$ * IN HIGH COURT OF DELHI AT NEW DELHI R-94 + ITA 349/2002 COMMISSIONER OF INCOME TAX ..... Appellant Through: Ms Suruchi Aggarwal, Senior Standing Counsel with Ms Lakshmi Gurung, Junior Standing Counsel with Ms Radhika Gupta and Mr Abhishek Sharma, Advocates. versus M/s VIPPS INDIA DELHI ..... Respondents Through : None. CORAM: HON'BLE DR. JUSTICE S.MURALIDHAR HON'BLE MR. JUSTICE VIBHU BAKHRU ORDER % 24.09.2015 1. This Appeal is directed against order dated 11th June, 2002 passed by Income Tax Appellate Tribunal ( ITAT ) in ITA No. 2383/Del/1997 for Assessment Year 1993-94. 2. question of law framed for consideration by this Court on 8 th February, 2006 reads as under: Whether ITAT was right in law in upholding deletion of additions of Rs.17.27 lacs made by AO that on account of sale of half building known as Vipps Centre, Delhi to its eleven ITA No. 349/2002 Page 1 of 5 partners? 3. brief facts are that Assessee Firm carries on business in real estate/construction and hiring of buildings. It purchased land from DDA in auction and, thereafter, entered into agreement on 5th September, 1985 with J.K. Synthetics Ltd. ( J.K. ) for sale of vertical half portion of proposed building @ Rs.525 per sq. ft. It also entered into separate agreements dated 12th September, 1995 with eleven partners of firm for sale of other half portion, except certain portion comprising of 8821.6 sq. ft which was retained by Assessee. 4. construction of building was completed in April, 1992 and respective portions were handed over to J.K. and eleven partners. Since construction was delayed and cost of construction increased, and since J.K. had insisted that Assessee should provide ground water tank, provision of 13 passenger elevators, marble chips flooring, refuse area on 5th Floor, providing better foundation using richer mix of cement and concrete etc., Assessee charged additional amount of Rs.100.40 per sq. ft from J.K. At same time additional amount @ Rs.31.43 per sq. ft was charged from eleven partners of Assessee firm. ITA No. 349/2002 Page 2 of 5 5. Assessing Officer (AO) took view that identical escalation amount should have been charged by Assessee from eleven partners. AO held that by charging lesser amount from partners, Assessee had reduced its profits by adopting dubious methods . Consequently, differential sum @ Rs.68.97 per sq feet was applied to portion sold to partners and sum of Rs.17,27,278/- was added to total income of Assessee. 6. In appeal, Commissioner of Income Tax (Appeals) [CIT (A)] by order dated 14th February, 1997 reversed above finding of AO. reasoning of CIT (A) was that although it could not be denied that Assessee had charged lesser consideration from its partners for portion of building sold to them, Assessee had in fact not received any amount than amount disclosed by it as having received from its partners. Referring to decision of Supreme Court in K.P. Verghese v. ITO 131 ITR 757, CIT (A) held that no addition to sale price declared by Assessee can be made if Assessee has not received any amount other than amount shown by him. When full amount received as consideration is shown, AO cannot go into adequacy or inadequacy of consideration. Reference was also made to decisions in CIT v. ITA No. 349/2002 Page 3 of 5 George Henderson & Co. Ltd. 66 ITR 622 and CIT v. Gillander Arbuthnot & Co., 187 ITR 407. 7. ITAT confirmed above finding of CIT (A) by impugned order dated 11th June, 2002. 8. It submitted by Ms. Lakshmi Gurung, learned Standing Counsel for Revenue, that alternate argument of Revenue as was noticed by AO in his order dated 22nd December, 1995 was not considered by CIT (A) or ITAT. This argument was that firm had incurred expense of Rs.68.97 per sq. ft. for personal benefit of its partners. Since it could not be business expense of firm, it was not allowable as such under Section 37 of Act. Accordingly, it was to be added to total income of firm. 9. above argument proceeds on premise that what was charged from J.K. was what was expended by firm in carrying out further modifications and additions to building as sought by J.K. Apart from statement recorded of one of partners of firm, it is not clear what material was available with Income Tax Department in order to conclude that aforementioned sum was in fact spent on carrying out ITA No. 349/2002 Page 4 of 5 modifications to building. In other words, factual foundation for testing above argument is lacking in present case. 10. In any event, case of Revenue before ITAT, appears to have turned only on point decided by CIT (A) i.e. whether firm was liable to pay capital gains on differential sum. ITAT has affirmed factual finding of CIT (A) that Assessee did not receive any sum other than that disclosed by it. conclusion of CIT (A) that AO could not have, in circumstance, assumed consideration other than what was disclosed in sale agreement cannot be faulted. This is also consistent with legal position explained by Supreme Court in K.P. Verghese (supra). 11. Consequentially, question framed is answered in affirmative i.e. in favour of Assessee and against Revenue. appeal is dismissed. S.MURALIDHAR, J VIBHU BAKHRU, J SEPTEMBER 24, 2015/pkv ITA No. 349/2002 Page 5 of 5 COMMISSIONER OF INCOME TAX v. M/s VIPPS INDIA DELHI