Decided on November 08,1993



M.K. Chaturvedi, Judicial Member - (1.) THIS appeal by the assessee is directed against the order of Commissioner of Gift-tax (Appeals)-XVII, Bombay, and pertains to the assessment year 1989-90.
(2.) The assessee is a private limited company. The Chairman of the assessee-company is Shri R.N. Mafatlal. The assessee is in construction business. It had constructed flats in Altamount property. This construction work was completed in the year 1983. The occupation certificate for the first eight floors was received on 15-12-1983. Thereafter, the flats were sold to various parties. Three flats numbering 701, 801 and 702 were left vacant. These flats were sold during the relevant year of assessment. Flat No. 702 was occupied by the assessee. Flat Nos.701 and 801 were let out on tenancy basis in the year 1985 at a monthly rent of Rs. 5,000 each to M/s. Anudeep Chemicals and SAP Chemicals. These are associated concerns of the assessee-company. All the shares in the two companies are held by Mrs. Shaileja C. Parikh and Miss Anuradha R. Mafatlal, who are daughters of the Chairman of the assessee-company, Shri R.N. Mafatlal. During the assessment proceedings for the assessment year 1984-85, the assessee had stated that unsold flats were held as 'investment'. Cost of construction of two flats, viz.,701 and 801 came to Rs. 26,82,193 each. There is no dispute on the amount of investment. Resolution passed on 9-12-1988 by the assessee-company reflects this amount as the cost to the assessee for the flat. Built-up area of each flat, according to the resolution, was 2912 sq. ft. and rent works out to Rs. 1.72 per sq. ft. per month. This resolution was passed on 7-1-1985.
(3.) THE tenancy started on 1st February, 1985 and continued till March 1989 when flats were sold for Rs. 9 lakhs each to M/s. Anudeep Chemicals and M/s. SAP Chemicals, who were tenants to the assessee-company. On the relevant valuation dates, the value of each flat was found to be Rs. 40 lakhs on the basis of similar sale incidents.;

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