Taxman alleged IT park firm was a tax dodge; ITAT rules for five landowners
In 2005, the landowners and the same builder executed a registered joint development agreement (JDA). Under the arrangement, the builder was granted development rights and a Power of Attorney (POA) was executed for various purposes. The builder also paid the landowners a refundable, interest-free deposit of Rs 37.25 lakh.
Five landowners in Bangalore have won a tax dispute against a firm set up to develop an IT park. The Income Tax Appellate Tribunal (ITAT) ruled in their favor, stating that the partnership firm, rather than the landowners themselves, owned the commercial property in Block C1. The dispute arose when the Income Tax Department alleged that the landowners were evading taxes by keeping rental earnings directly in the firm's bank account.
However, the ITAT found that the firm was a legitimate business entity, as evidenced by its audited financial statements and the fact that tenants paid rent directly into its account. The tribunal dismissed the department's claim that the landowners' personal withdrawals from the firm indicated they were the actual owners of the property.
Additionally, the ITAT ruled that the transfer of control of the property to the builder occurred earlier than initially thought, placing the original transfer of rights in 2005.
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