Ganesh Housing Corpn.Ltd., Ahmedabad V. The ACIT., Circle-4, Ahmedabad

CO 237/AHD/2011

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4475 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 6 month(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-09-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 03-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: APARNA A GARWAL
• Assessee Lawyers: DHIREN SHAH SHRI BHAVESH SHAH; NUPUR SHAH A RS IT
• Keywords: Capital asset; Depreciation; Earning of tax free income; Proportionate interest; Wholly owned subsidiary; Competent authority; Capital receipt; Rule 8D; Set aside
• Section: 143(3); 14A; 115JB; 195; 145; 12; 11

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR ./ I.T.A. NOS. 2122/AHD/2011, 2898/AHD/2013, 452 & 3011/AHD/2014, 3084 & 3085/AHD/2015 WITH CROSS OBJECTION NOS. 237/AHD/2011, 67, 129 & 322/AH D/2014, 217 & 218/AHD/2015 ( / ASSESSMENT YEARS: 2008-09, 2007-08, 2009-10, 2010-1 1, 2011-12 & 2012-13) THE ACIT/ THE DCIT CIRCLE-4, AHMEDABAD, NAVJIVAN TRUST BLDG., OFF. ASHRAM ROAD, AHMEDABAD / VS. GANESH HOUSING CORPORATION LTD. GANESH CORPORATE HOUSE, 100FT.HT ROAD, S. G. HIGHWAY, AHMEDABAD - 380054 ( APPELLANT / RESPONDENT ) .. ( RESPONDENT / CROSS OBJECTOR ) & ./ I.T.A. NOS. 2179/AHD/2011 & 298/AHD/2014 ( / ASSESSMENT YEARS: 2008-09 & 2009-10) GANESH HOUSING CORPORATION LTD. GANESH CORPORATE HOUSE, 100FT.HEBATPUR, THALTEJ ROAD, NR. SOLA BRIDGE, OFF. S. G. HIGHWAY, AHMEDABAD -380054 / VS. THE DCIT CIRCLE-4, AHMEDABAD, ./ ./ PAN/GIR NO. : AAACG5590Q ( APPELLANT / RESPONDENT ) .. ( RESPONDENT / CROSS OBJECTOR ) / REVENUE BY : SMT. APARNA AGARWAL, CIT. D.R. / ASSESSEE BY : SHRI DHIREN SHAH, SHRI BHAVESH SHAH & NUPUR SHAH, A.RS. ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 2 - / DATE OF HEARING 26/02/2019 ! / DATE OF PRONOUNCEMENT 15/05/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS HAVE BEEN PREFERRED BY THE AS SESSEE NAMED ABOVE FOR DIFFERENT ASSESSMENT YEARS TABULATE D HEREIN: SL. NO. IT(SS)A NO. AY CIT(A) ORDER DATED ASSESSMENT ORDER PASSED UNDER S.143 (3) & 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT) DATED 1 2122/AHD/2011 2008-09 30.06.2011 29.10.2010 2 2898/AHD/2013 2007-08 30.09.2013 16.12.2011 3 452/AHD/2014 2009-10 25.11.2013 15.12.2011 4 3011/AHD/2014 2010-11 05.08.2014 28.03.2013 5 3084/AHD/2015 2011-12 20.08.2015 26.03.2014 6 3085/AHD/2015 2012-13 21.08.2015 29.12.2014 2. THE ASSESSEE HAS ALSO FILED CROSS OBJECTIONS AND CROSS APPEALS (IN AYS. 2008-09 & 2009-10) IN THE REVENUES APPEALS PR IMARILY TO SUPPORT THE ACTION OF THE CIT(A). 3. WE FIRST TAKE UP REVENUES APPEAL FOR AY 2008-09 FOR ADJUDICATION AS STATED TO BE LEAD YEAR BY THE PARTI ES PRESENT. ITA NO. 2122/AHD/2011 A.Y. 2008-09 (REVENUES APPEA L) 4. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA DS AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO TREAT THE AMOUNT OF SALE CONSIDERATION AS ADVANCE M ONEY AND GIVE APPROPRIATE EFFECT TO THE SAME IN THE A.Y. 2012-13 AS PER LAW, WITHOUT APPRECIATING THE FACT THAT ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 3 - SALE OF LAND TRANSACTION IS COMPLETED AND THE AMOUN T PAYABLE FOR THE SAME IS SHOWN BY THE PURCHASER AS CURRENT LIABILITY. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.17,15,66,503/- MADE BY THE AO ON ACCOUNT OF DEDU CTION U/S 80IB(10), WITHOUT APPRECIATING FACT THAT WITH PROPER EVIDENCES A.O. H AS ESTABLISHED THAT THE ASSESSEE DOES NOT FULFILL THE CONDITION FOR CLAIMING DEDUCTI ON U/S 80IB. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF PROPORTIONATE INTEREST EX PENDITURE OF RS.1,31,00,000/- WITHOUT APPRECIATING FACT THE ASSESSEE COMPANY HAD INCURRED SUBSTANTIAL INTEREST EXPENDITURE WHILE GIVING INTEREST FREE LOANS. 5. GROUND NO.1 OF THE REVENUES APPEAL SEEKS TO ASS AIL THE ACTION OF THE CIT(A) IN AGREEING WITH THE CONTENTIONS OF T HE ASSESSEE THAT AMOUNT PAID BY M/S. ABIR INVESTMENTS PVT. LTD. (AIP L) TO THE ASSESSEE IS MERELY IN THE NATURE OF ADVANCE RECEIPT IN THE H ANDS OF ASSESSEE IN RESPECT OF LEASE OF LAND IN THE NOTIFIED AND APPROV ED SEZ. IT WAS HELD BY THE CIT(A) THAT SUCH ADVANCE RECEIPT CANNOT BE E QUATED WITH ACCRUED INCOME OF THE ASSESSEE ON THE PREMISE THA T IMPUGNED RECEIPTS RECEIVED AS ADVANCED MONEY WERE BESET WITH SEVERAL OBLIGATIONS PART OF THE LESSER ASSESSEE VIS--VIS L ESSEE (AIPL) AND ANY INCOME COULD ARISE AND CRYSTALIZE ONLY WHEN SUCH OB LIGATIONS ARE FULFILLED. 5.1 BRIEFLY STATED, THE ASSESSEE COMPANY IS ENGAGED IN THE ONGOING BUSINESS OF REAL ESTATE DEVELOPMENT & CONSTRUCTION ACTIVITIES. FOR THE AY 2008-09, THE ASSESSEE FILED RETURN OF INCOME AT RS. NIL INTER ALIA AFTER CLAIMING DEDUCTION OF RS.97,72,11,000/- UNDER S.80IAB OF THE ACT AND DEDUCTION OF RS.17,15,66,503/- UNDER S. 80IB(10) OF THE ACT. THE ASSESSEE COMPANY ALSO DECLARED A BOOK PRO FIT OF RS.1,38,21,919/- UNDER S.115JB OF THE ACT. THE RET URN WAS SUBJECTED TO SCRUTINY ASSESSMENT. THE AO OBSERVED THAT ASSES SEE COMPANY HAS CLAIMED DEDUCTION OF RS.97.72 CRORES UNDER S.80IAB IN RESPECT OF PROFITS OF THE UNDERTAKING ENGAGED IN THE BUSINESS OF DEVELOPMENT OF SPECIAL ECONOMIC ZONE (SEZ) IN THE NAME OF MILLION MINDS IT SEZ AT VILLAGE CHHARODI, TRAGAD, AHMEDABAD. THE AO NOT ED THAT THE ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 4 - ASSESSEE HAS GIVEN A PORTION OF LAND NOTIFIED AS SE Z TO A CONCERN NAMED AIPL BASED AT AHMEDABAD ON PERPETUAL LEASE. THE AO TREATED THIS TRANSACTION AS SALE OF LAND INSTEAD OF LEASE TRANSACTION. IT WAS OBSERVED THAT THE ASSESSEE COMPANY WAS TRADING THE SEZ LAND AS STOCK IN TRADE. THE ASSESSEE COMPANY SOLD 86574 SQ.MTR. FOR AN AGREED CONSIDERATION OF RS.1,04,23,58,400/- @ 12040 SQ. MT R. LIKEWISE THE COMPANY TO WHICH THE LAND HAS BEEN SOLD I.E. AIPL I S ALSO SHOWING THE LAND PURCHASED AS FIXED ASSETS IN HIS BALANCE SHEET . THE AO OBSERVED THAT A PHYSICAL INSPECTION OF THE SEZ SITE AS WELL AS THE DETAILS FURNISHED BY THE ASSESSEE REVEALS THAT NO DEVELOPME NT ACTIVITY HAS BEEN CARRIED OUT. THE UNEVEN AND WIDELY VEGETATED LAND IS LYING VACANT AND IT IS NOT EVEN COVERED BY BOUNDARY WALLS . THE SEZ PROPOSAL OF THE ASSESSEE COMPANY WAS STATED TO BE A PPROVED BY THE MINISTRY OF COMMERCE VIDE LETTER DATED 20 TH DECEMBER, 2006 SUBJECT TO CERTAIN CONDITIONS AS PRESCRIBED. FOR THE PROFI TS DECLARED BY THE ASSESSEE TO BE DERIVED FOR SEZ BUSINESS, THE AO INQ UIRED INTO THE ELIGIBILITY OF CLAIM OF DEDUCTION OF RS.97.72 CRORE S CLAIMED UNDER S.80IAB OF THE ACT BY ISSUE OF SHOW CAUSE NOTICE. IN RESPONSE, THE ASSESSEE PROVIDED A TABULATED STATEMENT GIVING DETA ILS ABOUT THE VARIOUS STAGES OF COMPLIANCE OF THE GENERAL CONDITI ONS ASSOCIATED TO PROPOSED SEZ PROJECT AS REPRODUCED BY THE AO IN PAR A 5.5 OF THE ASSESSMENT ORDER. 5.2 THE AO MADE FURTHER INQUIRIES WITH THE DEVELOPM ENT COMMISSIONER OF THE SEZ AND GATHERED VARIOUS INFORM ATION AND EXPLANATION FROM THE ASSESSEE AND FOUND THAT NO UND ERTAKING AS ON DATE HAS BEEN ALLOWED TO SET UP BUSINESS IN THE IT SEZ AND CONCLUDED THAT THE GAINS ARISING ON ALLEGED SALE OF LAND TO A IPL DOES NOT EMANATE FROM BUSINESS OF DEVELOPING A SEZ WITHIN THE SPHERE OF SECTION 80IAB OF THE ACT. WHILE HOLDING SO, THE AO ALSO TOOK NOT E OF THE INFORMATION RECEIVED FROM THE DEVELOPMENT COMMISSIO NER THAT NO ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 5 - OTHER PERSON INCLUDING AIPL HAS BEEN APPROVED AS C O-DEVELOPER OF THE IT SEZ IN TERMS OF SUB-SECTION 11 & 12 OF SECTI ON 3 OF SEZ. IT WAS THUS OBSERVED THAT AS ON THE DATE, THERE WAS NO CO-DEVELOPER FOR THE PROJECT. THE AO THUS TOOK A VIEW THAT NO DEVEL OPMENT WORK HAS TAKEN PLACE ON THE LAND DESIGNATED FOR THE SEZ. TH E AO ALSO NOTED THAT THE ASSESSEE COMPANY HAS MERELY ACQUIRED THE L AND AND HAS GOT THE SAME NOTIFIED FOR ITS PROPOSED SEZ. IT HAS SOL D A PART OF THE LAND AS STATED ABOVE AND HAS SHOWN HUGE PROFITS THEREFRO M AND CLAIMED THE SAME TO BE ELIGIBLE FOR DEDUCTION UNDER S.80IAB OF THE ACT. THE PURCHASING COMPANY IS SHOWING THE ASSETS PURCHASED AS FIXED ASSETS AND THE AMOUNT PAYABLE TO THE ASSESSEE COMPANY AS C URRENT LIABILITY. THE AGREEMENT BETWEEN THE ASSESSEE COMPANY AND AIPL SHOWS THAT THE ASSESSEE COMPANY HAS AGREED TO GET APPROVAL OF THE CO-DEVELOPER STATUS FOR THE PROPOSED LEASE FROM THE COMPETENT AU THORITY I.E. BOARD OF APPROVAL. HOWEVER, IT WAS FOUND THAT NO PERSON INCLUDING AIPL HAS BEEN APPOINTED TO BECOME CO-DEVELOPER OF THE SE Z PROJECT TILL DATE AS POINTED OUT BY DEVELOPMENT COMMISSIONER. IT WAS NOTED BY THE AO THAT THE PLOTS CAN BE TRANSFERRED ONLY TO AN APPROV ED UNIT AS PER THE SEZ REGULATIONS. THE AO THUS NOTED THAT AIPL TO WHO M THE LAND HAS BEEN SOLD IN THE PROPOSED SEZ BY WAY OF PERPETUAL L EASE DID NOT HAVE ANY APPROVED UNDERTAKING TO BE SET UP IN THE ITSEZ AS ON 31.03.2008 NOR WAS IT A CO-DEVELOPER OF THE PROJECT. 5.3 THE AO THUS FOUND THAT THERE WERE NO APPROVED U NITS IN SEZ AS ON 31.03.2008 AND THE COMPANY TO WHICH THE LAND HAS BEEN SOLD ACCORDINGLY WAS NOT ENTITLED TO PURCHASE LAND IN SE Z. THE ASSESSEE COMPANY HAS ALSO NOT FOLLOWED ANY OF THE REGULATION S STIPULATED IN SEZ ACT AS STATED ABOVE. THE AO THUS OPINED THAT I NCOME DECLARED BY THE ASSESSEE IN TERMS OF PERPETUAL LEASE AGREEMENT DID NOT ARISE FROM SEZ BUSINESS PURPOSE. THE AO ACCORDINGLY PROCEEDED TO DISALLOW THE ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 6 - DEDUCTION OF RS.97,72,11,000/- CLAIMED BY THE ASSES SEE UNDER S. 80IAB OF THE ACT. 6. AGGRIEVED BY THE ACTION OF THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 6.1 BEFORE THE CIT(A), THE ASSESSEE HOWEVER REPOSIT IONED ITSELF AND CHALLENGED THE ACTION OF THE AO ON TWO GROUNDS; (I) THE DISALLOWANCE OF CLAIM OF DEDUCTION UNDER S.80IAB OF THE ACT AMOU NTING TO RS.97,72,11,000/- IS NOT JUSTIFIED AT ALL IN THE FA CTS OF THE CASE AND (II) IN THE ALTERNATIVE TO THE FIRST CONTENTION, IT WAS ALSO CONTENDED BEFORE THE CIT(A) THAT THE AMOUNT RECEIVED FROM AIPL IN PU RSUANCE OF LEASE AGREEMENT IS MERELY AN ADVANCE RECEIPT WHICH CANN OT BE SUBJECTED TO TAX AT ALL AS IT CANNOT BE TREATED AS ACCRUED INCO ME OF THE ASSESSEE IN THE PECULIAR FACTUAL MATRIX OF THE CASE AT ALL DURI NG THE RELEVANT ASSESSMENT YEAR. 6.2 TO SUPPORT THE FIRST CONTENTION REGARDING CLAIM OF DEDUCTION UNDER S.80IAB, THE ASSESSEE REITERATED VARIOUS SUBM ISSIONS MADE BEFORE THE AO AS NOTED BY THE CIT(A) IN LENGTH AND CONTENDED THAT THE AO HAS WRONGLY APPRECIATED THE FACTS OF THE CASE AN D HAS WRONGLY OBSERVED THAT THE ASSESSEE HAS NOT DEVELOPED SEZ AN D MERELY SOLD NOTIFIED VACANT LAND WITHOUT ANY DEVELOPMENT AS CON TEMPLATED UNDER S.80IAB OF THE ACT. IT WAS CONTENDED THAT THE AO H AS WRONGLY TREATED THE CONCEPT OF DEVELOPMENT OF A SEZ PROVIDED IN SEC TION 80IAB OF THE ACT AS CONSTRUCTION ACTIVITY SIMPLICITOR WHEREAS TH E DEVELOPMENT OF A SEZ INCLUDES VARIOUS STAGES OF EXECUTION OF THE PRO JECT OF SEZ SUCH AS ACQUIRING MINIMUM AREA OF LAND ON WHICH SEZ IS REQU IRED TO BE DEVELOPED, OBTAINING APPROVAL FROM THE MINISTRY OF COMMERCE GOVERNMENT OF INDIA FOR DEVELOPMENT OF SEZ ETC. IN THE PROCESS OF DEVELOPMENT OF SEZ, THE DEVELOPER HAS TO OBTAIN VAR IOUS PERMISSIONS ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 7 - AND CLEARANCE UNDER DIFFERENT LAWS AND CIVIL CONSTR UCTION WORK FOR THE SEZ CAN COMMENCE ONLY THEREAFTER. THE ASSESSEE PUT FORTH VARIOUS OTHER CONTENTIONS TO SUPPORT ITS CLAIM FOR ELIGIBIL ITY OF DEDUCTION AS REPRODUCED BY THE CIT(A) IN PARA 4.2.3 PAGE NO.37 OF THE CIT(A)S ORDER. THE CIT(A) HOWEVER DID NOT FIND MERIT IN TH E FIRST PLEA OF THE ASSESSEE TOWARDS ELIGIBILITY OF DEDUCTION UNDER S.8 0IAB OF THE ACT. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE CIT (A) IN THIS REGARD IS REPRODUCED HEREUNDER: 4.3 I HAVE GONE THROUGH THE ABOVE REFERRED FACTS O F THE CASE, DCITS OBSERVATIONS ABOUT DISALLOWANCE OF CLAIM U/S 80IAB, WRITTEN SUBMISSIONS OF LD.AR AND LEGAL CITATIONS QUOTED IN THE REPLY. THE DCIT HAS OBSERVED IN PARA 5.20 & 5.21 AT PAGES 16 & 17 OF THE ASSES SMENT ORDER THAT THE ASSESSEE COMPANY HAS MERELY TRANSFERRED LAND TO A C OMPANY WHICH DOES NOT HAVE AN APPROVED UNDERTAKING IN THE SEZ. EVEN I F THE SAID COMPANY BECOMES A CO-DEVELOPER, IT WOULD NOT ENTITLE THE AS SESSEE COMPANY TO CLAIM DEDUCTION U/S 80IAB AS IN THE PRESENT FACTS A ND CIRCUMSTANCES OF THE CASE, THE ASSESSEE CANNOT BE SAID TO HAVE DEVELOPED SEZ. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, THE ASSESSEE'S CLAIM OF DEDUCTION 80IAB IS NOT ALLOWABLE DUE TO THE FOLLOWING REASONS: 1. THE ASSESSEE HAS NOT DEVELOPED SEZ DURING THE YE AR. VACANT LAND WITHOUT ANY DEVELOPMENT HAS BEEN SOLD BY THE A SSESSEE COMPANY. 2. THE ASSESSEE HAS CLAIMED EXEMPTION U/S 80IAB F ROM THE SIMPLE SALE OF LAND. THE SAME IS NOT ALLOWABLE AS P ER SEZ ACT AND RULES. PLOTS IN THE SEZ CAN BE SOLD ONLY TO THE UNDERTAKINGS APPROVED BY THE DEVELOPMENT COMMISSION ER. HENCE, THE SALE OF LAND TO AN UNAPPROVED UNDERTAKIN G CANNOT BE ELIGIBLE FOR DEDUCTION U/S 801AB, 3. THE ASSESSEE HAS NOT CARRIED OUT ANY SINGLE OPERATION WHICH IT WAS AUTHORIZED TO CARRY OUT TILL THE END OF THE RELEVANT FINANCIAL YEAR. 4. EVEN THE BOND CUM LEGAL UNDERTAKING REQUIRED T O BE EXECUTED WITH THE DEVELOPMENT COMMISSIONER WAS EXECUTED AFTE R THE END OF THE RELEVANT ASSESSMENT YEAR, 5. THE ASSESSEE COMPANY IN ITS VARIOUS COMPLIAN CE REPORTS TO THE DEVELOPMENT COMMISSIONER, IN ITS DIRECTORS; REP ORTS ETC. HAS ADMITTED THAT NO DEVELOPMENT HAS BEEN MADE AT T HE PROPOSED SITE OF SEZ.' 4.3.1 THE A.O HAS DISCUSSED THIS ISSUE ELABORATELY IN THE ASSESSMENT ORDER, AND REACHED TO THE LOGICAL CONCLUSION THAT T HE LAND IN SEZ CAN BE LEASED OUT EITHER TO THE APPROVED UNDERTAKING BY TH E DEVELOPMENT COMMISSIONER, OR TO THE CO DEVELOPER OF SEZ , IF TH AT CODEVELOPER HAS BEEN APPROVED BY THE ADMINISTRATIVE MINISTRY OF THE CENTRAL GOVT. IT IS AN ADMITTED FACT THAT IMPUGNED LAND HAS BEEN LEASED OUT TO M/S ABIR INVESTMENTS PVT LTD. WHICH IS NEITHER AN APPRO VED UNDERTAKING BY THE DEVELOPMENT COMMISSIONER NOR IT HAS CO DEVELOPER ST ATUS APPROVED BY ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 8 - THE RESPECTIVE MINISTRY OF THE CENTRAL GOVT. THE A O FURTHER MENTIONED THAT EVEN IF M/S ABIR INVESTMENT IS GRANTED THE STA TUS OF CO DEVELOPER BY THE CENTRAL GOVT., STILL THE IMPUGNED RECEIPT WOULD NOT BE ENTITLED FOR DEDUCTION U/S 801 AB IN THE HANDS OF THE APPELLANT. ON THE OTHER HAND, THE LD. A.R FILED VOLUMINOUS SUB MISSIONS, STATING THAT FOR LEASING OUT THE LAND IN SEZ, THE D EVELOPMENT OF SEZ, AND CONSTRUCTION ACTIVITIES ARE NOT MANDATORY. BUT NOWH ERE IN HIS ENTIRE SUBMISSIONS FILED ANY SATISFACTORY REPLY THAT IN TH E ABSENCE OF THE STATUS OF APPROVED INDUSTRY/UNDERTAKING FROM THE DEVELOPMENT COMMISSIONER, OR THE STATUS OF CO-DEVELOPER FROM THE CENTRAL GOVT., IN W HAT MANNER THE IMPUGNED LEASE RECEIPTS CAN BE TREATED AS EXEMPTED U/S 80IAB OF THE .IT. ACT,1961. 4.3.2. IN VIEW OF THE DETAILED AND LOGICAL DISCUSSI ON IN THE ASSESSMENT ORDER AND FACTS SUMMARIZED IN THE AFORESAID POINTS, I AM OF THE CONSIDERED OPINION THAT THE CLAIM OF DEDUCTION OF THE ASSESSEE U/S 801AB IS CORRECTLY DISALLOWED BY THE A.O. I THEREFORE HELD THAT THE A. O WAS FULLY JUSTIFIED IN REJECTING THE CLAIM OF THE APPELLANT U/S 801AB OF T HE ACT. 6.3 HAVING DISCARDED THE PLEA OF THE ASSESSEE TOWAR DS ELIGIBILITY OF CLAIM UNDER S.80IAB OF THE ACT, THE CIT(A) HOWEVER FOUND MERIT IN THE ALTERNATIVE PLEA OF THE ASSESSEE FOR EXCLUDING THE INCOME ARISING FROM LEASE CONSIDERATION RECORDED IN THE BOOKS FOR TRANSACTION WITH AIPL ON THE GROUND THAT THE NATURE OF RECEIPT FROM AIPL IS MERELY AN ADVANCE IN RESPECT OF PROPOSED LEASE OF LAND IN THE NOTIFIED AND APPROVED SEZ. THE CIT(A) TOOK NOTE OF THE PLEA OF THE ASSESSEE THAT SUCH ADVANCE RECEIPT IS NOT SUSCEPTIBLE TO TAX AS I T CANNOT BE TREATED AS AN ACCRUED INCOME IN THE CASE OF ASSESSEE COMPANY F OR THE REASON THAT THE SAID LEASE AGREEMENT IN THE NATURE OF MOU IS SU BJECT TO FULFILLMENT OF SEVERAL OBLIGATIONS BY THE ASSESSEE COMPANY AND THE LESSEE (AIPL) AND THE TRANSACTION SPECIFIED IN THE LEASE AGREEMEN T IS TOTALLY CONTINGENT UPON THE MAJOR CONDITION I.E. APPROVAL O F AIPL AS A CO- DEVELOPER BY THE APPROPRIATE AUTHORITY OF GOVERNME NT OF INDIA. ON REAPPRAISAL OF THE EVIDENCES PLACED TO CORROBORATE THE SECOND AND ALTERNATIVE PLEA, THE CIT(A) FOUND SUBSTANTIAL MERI T THEREIN. THE CIT(A) DEALT WITH ALTERNATIVE PLEA IN PARA 6 OF ITS ORDER AND AGREED WITH THE CONTENTIONS OF THE ASSESSEE THAT PROFIT OF SO CALLED SALE TRANSACTION IS PREMATURELY BOOKED IN THE BOOKS OF A CCOUNTS BY THE ASSESSEE WHICH HAVE NOT ACCRUED IN THE HANDS OF THE ASSESSEE AT ALL. ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 9 - THE SALE CONSIDERATION ARISING FROM THE PROPOSED LO NG TERM LEASE AGREEMENT OF 99 YEARS WAS FOUND TO BE HIGHLY CONDIT IONAL AND SUBJECT TO FULFILLMENT OF SEVERAL CONDITIONS WHICH HAVE NOT BEEN MET. THE CIT(A) ACCORDINGLY FOUND MERIT IN THE PLEA OF THE A SSESSEE THAT THE LEASE HAS NOT COME INTO FORCE AND CONSEQUENTLY INCO ME FROM SUCH ADDITIONAL LEASE AGREEMENT CANNOT BE SAID TO HAVE A CCRUED TO THE ASSESSEE AND CRYSTALIZED DURING THE YEAR NOTWITHSTA NDING SUCH SALE/LEASE CONSIDERATION HAS BEEN TREATED AS REVENU E RECEIPT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE CIT(A) HAVI NG TAKEN NOTE OF THE FACTS OF THE CASE AND HAVING REGARD TO THE LONG LINE OF JUDICIAL PRECEDENTS, DIRECTED THE AO TO TREAT THE AMOUNT ARI SING FROM THE PROPOSED LEASE AGREEMENT AS ADVANCE RECEIPT BEING CONTINGENT IN NATURE ON ACCOUNT OF NON-FULFILLMENT OF PRESCRIBED CONDITIONS OF THE LEASE AGREEMENT QUA RULES AND REGULATIONS OF SEZ. THE CIT(A) ACCORDINGLY GRANTED RELIEF TO THE ASSESSEE IN RESPE CT OF ALTERNATIVE CONDITIONS TO ADVANCE. 6.4 IT WILL BE APPROPRIATE TO REPRODUCE THE DELIBER ATIONS MADE BY THE CIT(A) WHILE DEALING WITH THE ALTERNATIVE CONTENTIO NS FOR THE SAKE OF PROPER REFERENCE: '4.3.3. NOW I TAKE UP THE ALTERNATIVE GROUND TAKEN BY THE APPELLANT ON THIS ISSUE MENTIONING THAT THE AMOUNT PAID BY M/S ABIR I NVESTMENTS (PVT ) LTD IS IN THE NATURE OF ADVANCE RECEIPT IN RESPECT OF L EASE OF LAND IN THE NOTIFIED AND APPROVED SEZ, SINCE IMPUGNED RECEIPTS WERE CHARGED WITH SEVERAL OBLIGATIONS AT THE PART OF THE LESSOR VISA VIS LESSEE. 4.3.4. THE REPLY OF LD. AR ECHOES THE REASONING IN PARA-6 OF SUBMISSION DATED 06/06/2011 THAT ''WITHOUT PREJUDICE TO ABOVE AND ALTERNATIVELY, THE APPELLANT SUBMITS THAT THE CONSIDERATION RECEIVED F ROM THE SAID TRANSACTION IS NOT TAXABLE AT ALL. FOR THAT MATTER, THE APPELLANT WOULD LIKE TO DRAW YOUR HONOURS ATTENTION TO THE CLAUSE 2 - CO NDITIONS PRECEDENT AND OBLIGATIONS OF THE PARTIES OF THE AGREEMENT ENT ERED INTO WITH M/S ABIR INVESTMENT PVT. LTD. (COPY OF SAID AGREEMENT I S ENCLOSED HEREWITH MARKED AS ANNEXURE J) . SUB-CLAUSE 2.1(A)/(C) AND (E) OF THE SAID AGREEMENT PROVIDES THAT AGREEMENT WOULD BE TERMINAT ED IF M/S ABIR INVESTMENT PVT. LTD. FAILS TO GET APPROVAL FROM THE CENTRAL GOVERNMENT ABOUT CO-DEVELOPER OF THE SEZ AND IN TURN THE APPEL LANT WOULD BE REQUIRED TO PAY BACK THE AMOUNT RECEIVED FROM M/S A BIR INVESTMENT PVT. ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 10 - LTD. THEREFORE, THE APPELLANT SUBMITS THAT UNDER TH E CIRCUMSTANCE, ST THE MOST THE AMOUNT RECEIVED BY THE APPELLANT FROM M/S ABIR INVESTMENT PVT. LTD. CAN BE TREATED AS ADVANCES RECEIPT TOWARDS CON DITIONAL LEASE TRANSACTION WHEREIN CERTAIN CONDITIONS ARE YET TO B E FULFILLED. IT IS SUBMITTED THAT WHEN A TRANSACTION IS A CONDITIONAL OR CONTINGENT UPON CERTAIN OBLIGATIONS TO BE FULFILLED BY THE PARTIES TO THE AGREEMENT, THE AGREEMENT COMES INTO EFFECT AND CAN BE RECOGNIZED O NLY WHEN ALL THE CONDITIONS ARE FULFILLED. IN THE FACTS OF THE PRES ENT CASE SINCE REGULATORY APPROVALS AND FORMALITIES ARE PENDING, THE LEASE AG REEMENT CANNOT BE GIVEN EFFECT TO AND NO PART OF THE RECEIPT CAN BE T REATED AS INCOME FOR THE YEAR UNDER CONSIDERATION. THE WHOLE OF THE REC EIPT PARTAKE THE CHARACTER OF INCOME ONLY IN THE YEAR OF FULFILLMENT OF THE TERMS AND CONDITIONS STIPULATED IN THE LEASE AGREEMENT. ADMI TTED CONDITIONS ARE YET TO BE FULFILLED AND THEREFORE THE AMOUNT SO REC EIVED BY THE APPELLANT VIZ RS.97,72,11,000/- HAS TO BE TREATED AS ADVANCE ONLY. 4.3.5 THE LD. A.R. FURTHER SUBMITTED THAT ALTERNATI VELY AND WITHOUT PREJUDICE TO ABOVE JUSTIFYING THE CLAIM OF DEDUCTIO N U/S. 80IAB OF THE I .T. ACT, BY THE APPELLANT, THE APPELLANT COMPANY HAS AL READY TAKEN AN ALTERNATIVE GROUND IN THE GROUNDS OF APPEAL FILED W ITH FORM NO. 35 IN PARA 7,8 & 9 WHILE TAKING THE CONTENTION THAT THE A MOUNT RECEIVED FROM M/S. ABIR INVESTMENTS PVT. LTD., IN PURSUANCE OF TH E LEASE AGREEMENT IS AN ADVANCE RECEIPT NOT SUBJECT TO TAX AS IT CANNOT BE TREATED AS AN ACCRUED INCOME IN THE CASE OF THE APPELLANT COMPANY FOR THE REASON THAT THE SAID LEASE AGREEMENT IS SUBJECT TO FULFILLMENT OF OBLIGA TIONS OF THE APPELLANT COMPANY AND LESSEE M/S. ABIR INVESTMENTS PVT.LTD., AND CONTINGENT UPON THE APPROVAL OF M/S. ABIR INVESTMENTS PVT.LTD., AS A CO-DEVELOPER BY THE APPROPRIATE AUTHORITY OF GOVERNMENT OF INDIA. 6.1. THE APPELLANT COMPANY INVITE YOUR HONOUR'S ATT ENTION TO THE LEASE AGREEMENT ENTERED INTO BETWEEN THE APPELLANT COMPAN Y AND M/S. ABIR INVESTMENTS PVT.LTD., WHICH HAS BEEN COMPILED AT PA GE NO. 672 TO 731 OF PAPER BOOK NO. 111. FROM THE PERUSAL OF THE SAID LE ASE AGREEMENT, IN PARA 2 THE TITLE GIVEN IS ' CONDITIONS PRECEDENT AN D OBLIGATIONS OF THE PARTIES ' AND IN PARA 2.1 IT HAS BEEN STATED THAT ' THE OBLIGATIONS OF THE PROPOSED LESSEE TO COMPLETE THE PROPOSED TRANSACTIO N AND EXECUTE THE LEASE DEED WITH THE DEVELOPER SHALL BE CONDITIONAL UPON FULFILLMENT OF THE EACH OF THE FOLLOWING CONDITIONS ( IN EACH CASE TO THE SATISFACTION OF THE PROPOSED LESSEE) AND THEREAFTER IN PARA (A) TO (I) , THE CONDITIONS TO BE FULFILLED BY THE DEVELOPER (APPELLANT COMPANY) HAVE BEEN STATED. IN PARA 2.2 OF THE LEASE AGREEMENT, IT HAS BEEN PRO VIDED THAT :- 'THE DEVELOPER HEREBY AGREES AND ACKNOWLEDGES THAT, ALL THE CONDITIONS PRECEDENT (OTHER THAN COMPLETION OF THE DUE DILIGENCE EXERCISE, BUT INCLUDING FURNISHING OF NECESSARY DOC UMENTS FOR CARRYING OUT DUE DILIGENCE AND RESOLUTION OF ISSUES RAISED PURSUANT TO THE DUE DILIGENCE) ARE WITHIN THE REASONABLE CON TROL OF THE DEVELOPER AND ANY FAILURE BY IT TO SATISFY OR CAUSE SATISFACTION OF SUCH CONDITIONS PRECEDENT WITHIN THE PERIOD SPECIFI ED ABOVE, WILL CONSTITUTE A MATERIAL BREACH OF THIS AGREEMENT AND IN SUCH CASE THE PROPOSED LESSEE SHALL BE ENTITLED TO TERMINATE THIS AGREEMENT. (EMPHASIS SUPPLIED). ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 11 - FURTHER, YOUR HONOUR IS REQUESTED TO REFER PARA 3.1 , 3.2 AND 3.4 OF THE LEASE AGREEMENT WHICH READS AS UNDER:- '3.1. SUBJECT TO NO ADVERSE FINDINGS RESULTING FROM THE DUE DILIGENCE EXERCISE UNDERTAKEN BY THE PROPOSED LESSE E, THE PROPOSED LESSEE HAS AGREED THAT THE SELLING PRICE P AYABLE TO THE DEVELOPER FOR THE SCHEDULED LAND FOR THE ENTIRE TER M UNDER THE LEASE DEED SHALL BE AN AMOUNT OF IKR 14400/- PER SQ .MTR (RUPEES FOURTEEN THOUSAND FOUR HUNDRED ONLY PER SQ. METER) (THE 'RENT')'. 3.2. ON THE DATE OF EXECUTION OF THIS AGREEMENT:- (A) THE PROPOSED LESSEE SHALL PAY AN AMOUNT OF RS. 1,00,00,000( RS ONE CRORE ONLY) TO THE DEVELOPER (THE 'EARNEST M ONEY'') WHICH SHALL BE ADJUSTABLE AND DEDUCTED FROM THE SELLING P RICE WITHIN 6 MONTHS FROM THE DATE OF THIS AGREEMENT 3.4. IF THIS AGREEMENT IS TERMINATED, THE DEVELOPER SHALL, WITHIN 7 WORKING DAYS OF RECEIVING THE WRITTEN NOTICE OF TER MINATION FROM THE PROPOSED LESSEE, RETURN THE EARNEST MONEY, TOGETHER WITH INTEREST AT THE RATE OF ( 6%) PER CENT PER ANNUM PAYABLE FRO M THE DATE ON WHICH THE ADVANCE AMOUNT IS PAID BY THE PROPOSED LE SSEE TILL THE REPAYMENT OF THE EARNEST MONEY BY THE DEVELOPER' IN PARA 4 OF THE LEASE AGREEMENT, THE TERM OF THE L EASE DEED HAS BEEN STATED TO BE NINETY NINE (99) YEARS. IN PARA 5.1 IN CLAUSE (O) IT HAS BEEN STATED AS UND ER :- '(O) THE DEVELOPER UNDERTAKES TO PROCURE THE CO-DEV ELOPER'S STATUS FOR AND ON BEHALF OF THE PROPOSED LESSEE. OF FICIAL EXPENSES TO OBTAIN CO-DEVELOPER STATUS SHALL BE BORNE BY HE PROPOSED LESSEE'. FROM THE PERUSAL OF THE AFORESAID TERMS AND CONDITI ONS OF THE LEASE AGREEMENT, IT IS CRYSTAL CLEAR THAT IT IS NOT A FOR MAL LEASE DEED ASSIGNING THE LEASEHOLD RIGHTS OF THE LAND OF THE SEZ PROJECT IN FAVOUR OF M/S. ABIR INVESTMENTS PVT.LTD. AS IT IS AN UNDERSTANDING BETW EEN THE APPELLANT COMPANY AND M/S. ABIR INVESTMENTS PVT. LTD. TO EXEC UTE FORMAL LEASE DEED ON FULFILLMENT OF THE CONDITIONS LAID DOWN IN THE S O-CALLED LEASE AGREEMENT WHEREIN THE OBLIGATIONS OF BOTH THE PARTI ES HAVE BEEN SPECIFIED. THE APPELLANT COMPANY INVITES YOUR HONOUR'S ATTENTI ON TO PARA 2.1 AS REFERRED HEREIN ABOVE THE APPELLANT COMPANY HAS ENT ERED INTO THE LEASE AGREEMENT WITH M/S. ABIR INVESTMENTS PVT LTD., SIMP LICITOR ON A 100 RUPEES STAMP PAPER AS IT IS NOT A FORMAL LEASE DEED AND THE SAME HAS NOT BEEN REGISTERED WITH THE REGISTRAR. THE SAID LAND O F NOTIFIED SEZ PROJECT OF THE APPELLANT IS STILL STANDING IN THE NAME OF A PPELLANT COMPANY IN THE LAND REVENUE RECORDS AND AS STATED ABOVE, THE SO-CA LLED LEASE AGREEMENT IS NOT REGISTERED WITH REGISTRAR EVEN THE LEASEHOLD RIGHTS IN THE SAID LAND HAS NOT BEEN CREATED IN FAVOUR OF M/S. ABIR INVESTM ENTS PVT. LTD ON THE LAND REVENUE RECORDS OF THE GOVERNMENT AND THEREFOR E, UNDER NO CIRCUMSTANCES, IT CAN BE TREATED AS SALE OF LAND AS OBSERVED BY THE LD. A.O IN THE ASSESSMENT ORDER. IT IS FURTHER SUBMITTE D THAT ABIR INVESTMENTS PVT. LTD HAS ALSO NOT GIVEN THE ENJOYMENT OF SAID L AND OF NOTIFIED SEZ PROJECT OF THE APPELLANT COMPANY AND THEREFORE, EVE N AS PER PROVISIONS OF SECTION 2(47) OF THE ACT, THE SO-CALLED LEASE AGREE MENT WHICH IS ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 12 - UNREGISTERED DOES NOT TRANSFER OF LAND /SALE OF LAN D. AS STIPULATED IN PARA 3.4 OF THE LEASE AGREEMENT REFERRED HEREINABOVE, TH E APPELLANT COMPANY IS REQUIRED TO REFUND THE ADVANCE RECEIPT (ADVANCE AMOUNT) PAID BY THE PROPOSED LESSEE TOGETHER WITH INTEREST @ 6% PER ANN UM PAYABLE FROM THE DATE ON WHICH THE ADVANCE AMOUNT IS PAID BY THE PRO POSED LESSEE TILL THE REPAYMENT OF EARNEST MONEY (ADVANCE RECEIPT) BY THE DEVELOPER IN A SITUATION THE LEASE AGREEMENT GET TERMINATED. 6.2. THE ADVANCE RECEIPTS FROM M/S. ABIR INVESTMENT S PVT. LTD., IN RESPECT OF DEVELOPMENT OF SEZ IN PURSUANCE OF SO-CA LLED LEASE AGREEMENT WITH THE APPELLANT COMPANY AND M/S. ABIR INVESTMENT S PVT.LTD., COULD NOT BE TREATED AS ACCRUED INCOME ASSESSABLE TO TAX DURI NG THE YEAR UNDER CONSIDERATION, SINCE SUCH ADVANCE RECEIPT WAS CHARG ED WITH SEVERAL OBLIGATIONS WHICH THE APPELLANT WAS TO DISCHARGE AN D M/S. ABIR INVESTMENTS PVT. LTD., WAS ALSO REQUIRED TO BE DISC HARGED AS A PROPOSED CO-DEVELOPER BEFORE EXECUTION OF THE FINAL LEASE DE ED. THE APPELLANT COMPANY RELIES UPON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CALCUTTA CO. LTD. VS. CIT 37 ITR 1 AND THE DECISION OF HON'BLE ITAT, HYDERABAD A BENCH IN THE CASE OF DCIT VS. SHAPOORJI PALLONJI BIOTECH PARK (P) LTD. 138 TTJ 62 (XEROX COPY OF THE SAID JUDGMENT IS ATTACHED HEREWITH AS PER ANNEXURE - I ) WHEREIN IT HAS BEEN HELD THAT' THE A.O WAS NOT JUSTIFIED IN ASSESSING THE INCOME IN RESPECT OF SALE DEEDS EXECUTED AS IT WOULD NOT GIVE RISE TO ANY INCOME ASSESSABLE TO TAX DURING THE YEAR UNDER CONSIDERATION SINCE THE SAID INCOME WAS CHARG ED WITH SEVERAL OBLIGATIONS WHICH THE ASSESSEE WAS TO DISCHARGE BEF ORE THE DELIVERY OR PLOTS TO THE BUYERS IN TERMS OF THE SALE DEEDS ITSE LF. THE ASSESSEE WAS OBLIGED TO CARRY ON VARIOUS DEVELOPMENTAL WORKS NOT ONLY WITHIN THE SOLD PLOTS BUT ALSO TO PROVIDE THE COMMON FACILITIES FOR THE ENTIRE PARK, AND THEN ONLY DELIVER THE POSSESSION OF THE PLOTS SOLD TO THE PARTIES'. THE HON'BLE ITAT HYD., IN THE CASE CITED SUPRA HAS ALSO FOLLOWED THE PRINCIPLES LAID DOWN BY THE APEX COURT IN THE CASE OF CALCUTTA CO. LTD. VS. CIT 37 ITR 1. 6.3. THE CONTENTION OF THE LD. A.O TO THE EFFECT TH AT IN THE BOOKS OF ACCOUNT, THE APPELLANT HAS TREATED THE TRANSACTION OF LEASE AS A TRANSACTION OF SALE OF LAND AND THEREFORE THERE IS A VIOLATION OF PROVISIONS OF SEZ. ACT AND HENCE INCOME EARNED OUT OF SUCH ACT IVITY CANNOT QUALITY FOR DEDUCTION U/S. 80IAB OF THE ACT. THE APPELLANT MOST RESPECTFULLY SUBMITS THAT THE OBJECTION RAISED BY THE LD. A.O IS WITHOUT ANY SUBSTANCE BOTH ON FACTS AS WELL AS IN LAW IN AS MUCH AS TREAT MENT GIVEN IN THE BOOKS OF ACCOUNTS IS A MATTER OF NO CONSEQUENCE WHEN IT C OMES TO DECIDING A PARTICULAR CHARACTER OF AN INCOME UNDER THE IT. ACT . THE APPELLANT SUBMITS THAT A TRANSACTION OF LEASE FOR THE USER OF LAND IN ANY CASE IS OUTSIDE THE PURVIEW OF ACCOUNTING STANDARD - 19 ISS UED BY THE ICAI OF INDIA. THE APPELLANT FURTHER SUBMITS THAT IT IS VER Y SETTLED LAW THAT ACCOUNTING ENTRIES MADE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IS NOT THE DECISIVE FACTOR TO DETERMINE WHETHER THE INCOME IS CHARGEABLE TO TAX OR WHETHER THE EXPENDITURE IS ALLOWABLE OR NOT TO THE ASSESSEE. THE HON'BLE SUPREME COURT IN NUMBER OF CASES ALREAD Y HELD THAT MERE BOOK KEEPING ENTRY CANNOT BE TERMED AS INCOME UNLES S INCOME HAS ACTUALLY RESULTED. THE APPELLANT COMPANY RELY UPON THE DECI SION OF HON'BLE SUPREME COURT IN THE CASE OF STATE BANK OF INDIA VS. CIT 157 ITR 67 WHEREIN IT HAS BEEN HELD ASUNDER:- ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 13 - 'IT IS WELL SETTLED THAT THE WAY IN WHICH ENTRIES A RE MADE BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT IS NOT DETERMINATIVE OF THE QUESTION WHETHER THE ASSESSEE HAS EARNED ANY PROFIT OR SUFFERED ANY LOSS . THE ASSESSEE MIGHT, BY MAKING ENTRIES WHICH WERE NOT IN CONFORMITY WITH PROPER PRINCIPLES OF ACCOUNTANCY, HAVE CONCEALED PROFIT OR SHOWED LOSS A ND THE ENTRIES MADE BY HIM CANNOT, THEREFORE, BE REGARDED AS CONCLUSIVE ONE WAV OR THE OTHER'. FURTHER, RELIANCE IS ALSO PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. INDIA DISCOUNT CO. LTD . 75 ITR 191 (SC) WHEREIN IT HAS BEEN HELD AS UNDER :- THAT THE RECEIPT BEING ONE WHICH IN LAW COULD NOT BE REGARDED AS INCOME, IT COULD NOT BECOME VIE MERELY BECAUSE THE RESPONDENT ERRONEOUSLY CREDITED IT TO THE PROFIT AND LOSS ACCO UNT'. RELIANCE IS ALSO PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. MESSRS SHOORJI VALLABHDAS AND CO. 4 6 IT 144 , WHEREIN IT HAS BEEN HELD AS UNDER :- 'INCOME TAX IS A LEVY ON INCOME. THOUGH THE INCOME- TAX ACT TAKES INTO ACCOUNT TWO POINTS OF TIME AT WHICH THE LIABILITY T O TAX IS ATTRACTED, VIZ.. THE ACCRUAL OF THE INCOME OR ITS RECEIPT, YET THE S UBSTANCE OF THE MATTER IS THE INCOME. IF INCOME DOES NOT RESULT AT ALL, THERE CANNOT BE A TAX., EVEN THOUGH IN BOOK-KEEPING, AN ENTRY IS MADE ABOUT A 'H YPOTHETICAL INCOME'' WHICH DOES NOT MATERIALIZE. WHERE INCOME HAS IN FAC T, BEEN RECEIVED AND IS SUBSEQUENTLY GIVEN UP IN SUCH CIRCUMSTANCES THAT IT REMAINS THE INCOME OF THE RECIPIENT, EVEN THOUGH GIVEN UP THE TAX MAY BE PAYABLE. WHERE, HOWEVER, THE INCOME CAN BE SAID NOT TO HAVE RESULTE D AT ALL, THERE IS OBVIOUSLY NEITHER ACCRUAL NOR RECEIPT OF INCOME, EV EN THOUGH AN ENTRY TO THAT EFFECT MIGHT, M CERTAIN CIRCUMSTANCES, HAVE BE EN MADE IN THE BOOKS OF ACCOUNT' THE RELIANCE IS ALSO PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SUTLEJ COTTON MILLS LTD. VS. CIT, WEST BENGAL 116 ITR 1 WHEREIN IT HAS BEEN HELD AS UNDER :- 'IT IS NOW WELL SETTLED THAT THE WAY IN WHICH ENTRI ES ARE MADE BY AN ASSESSES IN HIS BOOKS OF ACCOUNT IS NOT DETERMINATI VE OF THE QUESTION WHETHER THE ASSESSEE HAS EARNED ANY PROFIT OR SUFFE RED ANY LOSS. THE ASSESSEE MAY. BY MAKING ENTRIES WHICH ARE NOT IN CO NFORMITY WITH THE PROPER PRINCIPLES OF ACCOUNTANCY, CONCEAL PROFIT OR SHOW LOSS AND THE ENTRIES MADE BY HIM CANNOT, THEREFORE, BE REGARDED AS CONCLUSIVE ONE WAY OR THE OTHER. WHAT IS NECESSARY TO BE CONSIDERED IS THE TRUE NATURE OF THE TRANSACTION AND WHETHER IN FACT IT HAS RESULTED IN PROFIT OR LOSS TO THE ASSESSEE'. 6.4. ON THE OTHER HAND, THE ABSENCE OF AN ENTRY IN THE BOOKS IS ALSO NOT FATAL TO A CLAIM FOR DEDUCTION. IT HAS BEEN HELD TH AT IN A CASE WHERE THE MERCANTILE SYSTEM IS ADOPTED, FOR DEDUCTION CAN BE MADE EVEN IN THE ABSENCE OF ENTRIES IN THE BOOKS. THIS WAS A CASE WH ERE NO ENTRIES WERE PASSED IN THE BOOKS OF ACCOUNT TOWARDS A DISPUTED S ALES TAX LIABILITY. HOWEVER, THE SUPREME COURT HELD THAT IF UNDER THE L AW, A DEDUCTION MUST BE ALLOWED BY THE ASSESSING OFFICER, THE ASSESSEE W ILL NOT LOSE THE RIGHT OF CLAIMING OR WILL NOT BE DENIED THE DEDUCTION. THE E NTITLEMENT TO A ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 14 - PARTICULAR DEDUCTION OR NOT WILL DEPEND ON THE PROV ISION OF LAW RELATING THERETO AND THE EXISTENCE OR ABSENCE OF ENTRIES IN THE BOOKS OF ACCOUNT WILL NOT BE DECISIVE OR CONCLUSIVE IN THE MATTER - KEDARNATH JUTE MFG. CO. LTD. VS. CIT (1971) 82 ITR 363 (SC). THE SAME PRINCIPLE WILL APPLY WHERE NO CREDIT ENTRY IS MADE FOR ANY INCOME THAT HAD ACC RUED AND HAS BECOME RECEIVABLE - CIT V. CHUNILAL V. MEHTA & SONS (P) LT D. (1971) 82 ITR 54 (SC). THIS IS SO BECAUSE LAWS IS MORE IMPORTANT THA N ACCOUNTING ENTRIES OR PRACTICE. THEREFORE, THE APPELLANT SUBMITS THAT UNDER THE CIR CUMSTANCES, AT THE MOST THE AMOUNT RECEIVED BY THE APPELLANT FROM M/S. ABIR INVESTMENTS PVT. LTD., CAN BE TREATED AS ADVANCES RECEIPT TOWARDS CO NDITIONAL LEASE TRANSACTION WHEREIN CERTAIN CONDITIONS ARE YET TO B E FULFILLED. IT IS SUBMITTED THAT WHEN A TRANSACTION IS A CONDITIONAL OR CONTINGENT UPON CERTAIN OBLIGATIONS TO BE FULFILLED BY THE PARTIES TO THE AGREEMENT, THE AGREEMENT COME INTO EFFECT AND CAN BE RECOGNIZED ON LY WHEN ALL THE CONDITIONS ARE FULFILLED. IN THE FACTS OF THE PRESE NT CASE SINCE REGULATORY APPROVALS AND FORMALITIES ARE PENDING, THE LEASE AG REEMENT CANNOT BE GIVEN EFFECT TO AND NO PART OF THE RECEIPT CAN BE T REATED AS INCOME FOR THE YEAR UNDER CONSIDERATION. THE WHOLE OF THE RECEIPT PARTAKE THE CHARACTER OF INCOME ONLY IN THE YEAR OF FULFILLMENT OF THE TE RMS AND CONDITIONS STIPULATED IN THE LEASE AGREEMENT, ADMITTED CONDITI ONS ARE YET TO BE FULFILLED AND THEREFORE THE AMOUNT SO RECEIVED BY T HE APPELLANT VIZ. RS. 1,00,00,000/- FROM ABIR INVESTMENTS PVT. LTD., HAS TO BE TREATED AS ADVANCE ONLY NOT SUBJECT TO TAX. 6.5. THE VARIOUS HIGH COURTS HAVE RULED THAT THE AU THORITIES UNDER THE ACT ARE UNDER AN OBLIGATION TO ACT IN ACCORDANCE WI TH LAW. TAX CAN BE COLLECTED ONLY AS PROVIDED UNDER THE ACT. IF ANY AS SESSEE, UNDER A MISTAKE, MISCONCEPTIONS OR ON NOT BEING PROPERLY INSTRUCTED IS OVER ASSESSED, THE AUTHORITIES UNDER THE ACT ARE REQUIRED TO ASSIST HI M AND ENSURE THAT ONLY LEGITIMATE TAXES DUE ARE COLLECTED. IN SUPPORT OF T HE SAME CONTENTION, THE APPELLANT COMPANY RELY UPON THE DECISION OF JURISDI CTIONAL HON'BLE GUJARAT HIGH COURT IN THE CASE OF S.R. KOSTI V. CIT (GUJ) (2005) 276 ITR 165 AND THE JUDGMENT OF THE OTHER HIGH COURTS THE CASE OF YOOSUF V. I.T.O. (1970) 77 ITR 237, CITV. BHARAT GENERAL REIN SURANCE CO. LTD. (1971), 81 ITR 303, CIT V. ARCHANA R. DHANWATE (198 2) 136 ITR 355 (BOM). IF PARTICULAR LEVY IS NOT PERMITTED UNDER THE ACT, TAX CANNOT BE LEVIED APPLYING THE DOCTRINE OF ESTOPPEL. (SEE DY. COMMISSIONER OF SALES TAX VS. SREENI PRINTERS (1987) 67 SC 279. THE COURT IN THE CASE OF MIRMALA L. MEHTA V. A. .BALASUBRAMANIAN, C.L.T. (2004) 269 ITR 1 HAS HELD THAT THERE CANNOT BE ANY ESTOPPEL AGAINST THE STATUTE. ARTICLE 265 OF THE CONSTITUTIO N OF INDIA IN UNMISTAKABLE TERMS PROVIDES THAT NO TAX SHALL BE LE VIED OR COLLECTED EXCEPT BY AUTHORITY OF LAW. ACQUIESCENCE CANNOT TAKE AWAY FROM A PARTY THE RELIEF THAT HE IS ENTITLED TO WHERE THE TAX IS LEVIED OR C OLLECTED WITHOUT AUTHORITY OF LAW. IN THE CASE ON HAND, IT WAS OBLIGATORY ON T HE PART OF THE ASSESSING OFFICER TO APPLY HIM MIND TO THE FACTS DISCLOSED IN THE RETURN AND ASSESS THE ASSESSEE KEEPING IN MIND THE LAW HOLDING THE FI ELD. FROM THE PRINCIPLE AND RATIO LAID DOWN IN THE AFORE STATED JUDGMENTS OF THE VARIOUS HIGH COURTS, THE APPELLANT COMPANY HAS TO SUBMIT THAT THE ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 15 - ADVANCE RECEIPT FROM ABIR INVESTMENTS PVT. LTD. IN PURSUANCE OF SO-CALLED LEASE AGREEMENT IN RESPECT OF WHICH INCOME WAS NOT ACCRUED TO THE APPELLANT COMPANY DURING THE YEAR UNDER CONSIDERATI ON EVEN THOUGH THE SAME HAS BEEN CONSIDERED BY THE APPELLANT COMPANY I N THE RETURN OF INCOME, THE SAME CANNOT BE SUBJECTED TO TAX AND THE APPELLATE AUTHORITIES HAS TO FIND OUT WHETHER A PARTICULAR INCOME WAS ASS ESSABLE OR NOT. MERELY BECAUSE THE ASSESSEE WRONGLY INCLUDED THE INCOME IN ITS RETURN OF INCOME IT CANNOT BE CONFERRED THE INCOME IN THAT YEAR AS H AS BEEN HELD IN THE DECISION OF DELHI HIGH COURT IN THE CASE OF BHARAT GENERAL REIN SURANCE CO.LTD. (1971) 81 ITR 303 . IN VIEW OF THE AFORESAID FACTUAL AND LEGAL SUBMISSI ONS, ALTERNATIVELY THE ADVANCE RECEIPTS FROM ABHIR INVESTMENTS PVT. LTD. I S REQUIRED TO BE TREATED AS ADVANCE RECEIPT NOT SUBJECT TO TAX. 4.3.6 FROM THE ABOVE FACTS IT IS OBSERVED THAT THE APPELLANT COMPANY IS THE APPROVED DEVELOPER OF THE SEZ. THE SPECIFIC LAN D HAS BEEN EARMARKED FOR THE DEVELOPMENT OF THE SEZ AND HAS BEEN NOTIFIE D BY THE CENTRAL GOVT. ACCORDINGLY. AS PER THE SEZ, RULES AND REGULATIONS, THE NOTIFIED LAND CAN NOT BE SOLD TO ANY ONE BUT CAN BE LEASED OUT ONLY E ITHER TO THE APPROVED UNDERTAKING BY THE DEVELOPMENT COMMISSIONER OR CAN BE LEASED OUT TO CO- DEVELOPER OF THE SEZ APPROVED BY THE CENTRAL GOVT. THE APPELLANT COMPANY ENTERED IN TO A LEASE AGREEMENT WITH M/S AB IR INVESTMENT PVT LTD( AIPL) IN THE F.Y. 2007-08 , FOR GIVING CERTAIN AREA OF NOTIFIED LAND TO AIPL SUBJECT TO ONE MAJOR CONDITION THAT M/S AIPL I S GRANTED APPROVAL OF 'CO DEVELOPER' BY THE CENTRAL GOVT., OTHERWISE THE AGREEMENT WOULD STAND TERMINATED, AND THE APPELLANT COMPANY HAS TO RETURN BACK THE AMOUNT RECEIVED FROM M/S AIPL WITH INTEREST @ 6%. FROM PAR A 5.16 OF THE ASSESSMENT ORDER, IT IS ALSO NOTICED THAT THE MAJOR AMOUNT OF THE CONSIDERATION OF LEASE AGREEMENT HAS BEEN SHOWN AS OUTSTANDING IN THE BOOKS OF ACCOUNT OF THE APPELLANT AND AS CURRENT LI ABILITIES IN THE BOOKS OF ACCOUNT OF THE LESSEE. 4.3.7 THE TOTAL CONSIDERATION DETERMINED IS RS.1042 358400/- AND AFTER REDUCING THE COST OF LEASED OUT LAND OF RS.65147400 /- THE APPELLANT COMPANY ENTERED THE GAIN OF RS.977211000/- IN ITS B OOKS OF ACCOUNT AND CLAIMED THE SAME AS DEDUCTION U/S 80IAB OF THE ACT IN THE RETURN OF INCOME. THE CLAIM OF 80IAB WAS DISALLOWED BY THE A. O AND THE SAME HAS BEEN CONFIRMED BY ME IN THE EARLIER PARAS OF THE AP PELLATE ORDER. 4.3.8 NOW THE QUESTION ARISES WHETHER THE IMPUGNED CONDITIONAL LEASE TRANSACTION IS CRYSTALLIZED AND INCOME HAS BEEN A CCRUED, WHICH IS LIABLE FOR TAXATION. IT IS AN ADMITTED FACT THAT IMPUGNED LEASE AGREEMEN T IS CONDITIONAL SUBJECT TO APPROVAL OF CENTRAL GOVT. AS CO DEVELOPE R TO M/S AIPL. AS PER THE SUBMISSION OF THE APPELLANT THE IMPUGNED LEASE AGREEMENT .WITH M/S ABIR INVESTMENT PVT LTD IS ON STAMP PAPER OF RS. 1 DO/- AND IT IS NOT A FORMAL LEASE DEED AND THE SAME HAS NOT BEEN REGISTE RED WITH THE REGISTRAR. THE SAID LAND OF NOTIFIED SEZ OF THE APP ELLANT IS STILL STANDING IN THE NAME OF THE APPELLANT IN LAND REVENUE RECORD S, AND AS SUCH LEASE HOLD RIGHTS IN THE IMPUGNED LAND HAS NOT BEEN CREAT ED IN FAVOUR OF M/S AIPL. AS PER PROVISIONS OF S.2 (47) OF THE ACT, THE SO CALLED LEASE AGREEMENT WHICH IS UNREGISTERED DOES NOT AMOUNT TO LEASE OF LAND/ SALE OF ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 16 - LAND. THE AIPL HAS NOT BEEN APPROVED AS CODEVELOPER BY THE CENTRAL GOVT. TILL THE TIME OF WRITING THIS APPELLATE ORDER . AS PER LETTER NO. F.2/494/2006-EPZ DATED 26/11/2010 THE CENTRAL GOVT. HAS APPROVED THE EXTENSION TO THE APPELLANT TO DEVELOP THE SEZ TILL 19.12.2011. THEREFORE, IT IS MUST FOR THE SURVIVED OF THE LEASE AGREEMENT EITHER TO GET THE APPROVAL OF CENTRAL GOVT. AS CO DEVELOPER FOR AIPL BEFORE 19.12.2011 OR TO TERMINATE THE LEASE AGREEMENT AND TO REFUND THE AMOUNT RECEIVED FROM AIPL ACCORDINGLY. 4.3.9 THE LD. A.R ALSO DREW MY ATTENTION TOWARDS TH E BOARD RESOLUTION PASSED IN THE BOARD MEETING DATED 20 JUNE, 2011, . THE CONTAINS OF THE BOARD RESOLUTION ARE AS UNDER :- CERTIFIED TURE COPY OF THE EXTRACT OF MINUTES OF TH E MEETING OF BOARD OF DIRECTORS OF GANESH HOUSING CORPORATION LIMITED AT THEIR MEETING HELD ON 20 TH JUNE, 2011 AT THE REGISTERED OFFICE OF THE COMPANY AT GAN ESH CORPORATE HOUSE, 100 FT. HEBATPUR-THALTEJ ROD, NR. SOLA BRIDGE. OFF. S.G. HIGHWAY, AHMEDABAD- 380 054. =============================================== REF: TERMINATION OF AGREEMENTS WITH ABIR INVESTMENT PRIVATE LTD THE MANAGING DIRECTOR OF THE COMPANY INFORMED THE M EMBERS OF THE BOARD THAT ERSTWHILE GANESH INFRASTRUCTURE PRIVATE LIMITED (GTPL) HAS MERGED WITH OUR COMPANY PURSUANT TO THE ORDERS PASS ED BY THE HON'BLE HIGH COURT OF GUJARAT THE SAID GIPL HAD ENTERED INT O THREE AGREEMENTS DATED 26/6/2007, 26/9/2007 AND 8/11 /2007 WITH ABIR INVESTMENT PRIVATE LIMITED (ALPL) WHEREBY IT WAS AGREED TO GIVE ON LEA SE VARIOUS PIECES OF LAND ADMEASURING 25437 SQ. MTRS, 9000 SQ. MTRS AND 29237 SQ. MTRS RESPECTIVELY SITUATED IN THE NOTIFIED AREA OF SPECI AL ECONOMIC ZONE ON CONTIGUOUS LAND SITUATED AT VILL : CHHARODI, DIS T AHMEDABAD. ON 21/3/2008 OUR COMPANY ALSO ENTERED INTO SIMILAR AGR EEMENT WITH GTPL, FOR GIVING ON LEASE 8712 SQ. MTRS OF LAND SITUATED AT THE AFORESAID PLACE. IN ALL AFORESAID AGREEMENTS, IT WAS ONE OF THE COND ITIONS TO GIVE THE LAND FOR A LONG TERM LEASE PERIOD 99 YEARS. IT WAS ALSO FURTHER AGREED BETWEEN THE PARTIES TO EXECUTE A DEFINITIVE LEASE DEED CONF IRMING ALL THE LEGAL REQUIREMENTS OF IT SEZ RULES AND REGULATIONS. FURTH ER MANAGING DIRECTOR ALSO INFORMED THE BOARD THAT DURING FINANC IAL YEAR 2007-08 THE COMPANY HAD BOOKED INCOME OF RS. 97.72 CRORES AS IN COME FROM PERPETUAL LEASE OF LAND SITUATED IN SEZ. IN THE RETURN OF INC OME THIS INCOME WAS CLAIMED AS EXEMPT U/S 80IAB. IN THE SCRUTINY ASSESS MENT THE CLAIM OF EXEMPTION WAS DENIED BY THE DCIT. THEREAFTER, THE M ATTER WAS REFERRED FOR APPEAL BEFORE CIT-APPEALS. DURING THE COURSE OF HEARING, VARIOUS OPINIONS FROM TAX CONSULTANTS AND ADVISORS WERE OBT AINED OH THE SUBJECT MATTER, IT WAS OPINED THAT IN THE ABSENCE OF ANY CR YSTALLIZATION OF ACCRUAL OF INCOME, THE AMOUNT RECEIVED FOR PERPETUAL LEASE IS TO BE CONSIDERED AS ADVANCE AND TO BE ACCOUNTED AS CURRENT LIABILITY. T HE INCOME COULD NOT BE BOOKED FOR THE REASON THAT THE TERMS AND CONDITIONS OF CO-DEVELOPER UNDER THE PROVISIONS OF THE SEZ SCHEME AS LAID DOWN IN TH E AGREEMENTS BETWEEN THE COMPANY AND ABIR INVESTMENT PVT LTD., ARE NOT F ULFILLED AS ON THE DATE RELEVANT TO F.Y. 2007-08. IT WAS ALSO OPINED THAT T HE INCOME CAN BE ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 17 - BOOKED AS INCOME FROM THE DEVELOPMENT OF SEZ AND WI THIN THE MEANING OF PROVISIONS CONTAINED U/S 80IAB OF THE ACT, 1961. WITH THE ABOVE REFERRED BACKGROUND THE MATTER WAS D ISCUSSED AT LENGTH AND IT WAS DECIDED TO REVERSE THE INCOME OF RS. 97. 72 CRORES AS INCOME FROM PERPETUAL LEASE OF LAND SITUATED IN SEZ BY CAN CELLING THE AGREEMENTS ENTERED WITH ABIR INVESTMENT PVT LTD. THIS REVERSAL OF INCOME AND ACCOUNTING THE SAME AS ADVANCE FOR THE PERPETUAL LE ASE IS TO BE MADE BY THE COMPANY BEFORE THE END OF F.Y. 2011-12. THE MEMBERS OF THE BOARD HELD DETAILED DISCUSSION I NVOLVING VARIOUS FACTS OF THE PROPOSAL. AFTER THE PROLONGED DISCUSSIONS, T HE MEMBERS OF THE BOARD PASSED THE FOLLOWING RESOLUTIONS UNANIMOUSLY. RESOLVED THAT FOUR AGREEMENTS FOR PROPOSED LEASE EN TERED INTO WITH ABIR INVESTMENT PRIVATE LIMITED (AIPL) ON 26-06-200 7, 26-09-2007, 08- 11-2007 AND 21-03-2008 FOR LEASING VARIOUS PIECES O F LAND SITUATED IN THE NOTIFIED AREA OF SPECIAL ECONOMIC ZONE FOR INFORMAT ION TECHNOLOGY (IT SEZ) VILL: CHHARODI AND VILL: TRAGAD, DIST: AHMEDAB AD BE TERMINATED IN VIEW OF THE FAILURE ON THE PART OF AIPL TO FULFILL CERTAIN CONDITIONS OF AGREEMENTS. FURTHER RESOLVED THAT IT IS HEREBY DECIDED THAT IN THE ABSENCE OF ANY CRYSTALLIZATION OF ACCRUAL OF INCOME, THE AMOUN T RECEIVED FROM ABIR INVESTMENT PRIVATE (AIPL) BE TREATED AS CURRENT LIA BILITY. FURTHER RESOLVED THAT THE LEASE INCOME OF RS. 97.72 CRORES BE REVERSED BEFORE THE END OF FINANCIAL YEAR 2011-2012 . FURTHER RESOLVED THAT MR. KIPAKKUMAR G. PATEL, CHAI RMAN AND MR. SHEKHAR G. PATEL, MANAGING DIRECTOR OF THE COMPANY BE AND ATE HEREBY JOINTLY/SEVERALLY AUTHORIZED TO DO ALL ACTS, DEEDS, MATTERS AND THINGS INCIDENTAL OR ANCILLARY THERETO. FURTHER RESOLVED THAT A COPY OF THE AFORESAID RESOL UTION BE FURNISHED TO ANY AUTHORITY FOR THEIR RESPECTIVE PER USAL.' FROM THE BOARD RESOLUTION IT IS ABSOLUTELY CLEAR TH AT THE IMPUGNED TEASE AGREEMENT WOULD STAND TERMINATED AND NECESSAR Y ENTRY WOULD BE PASSED IN THE BOOKS OF ACCOUNT OF THE APPELLANT COM PANY IN F.Y. 2011-12 ITSELF, ACCORDINGLY. THE ABOVE BOARD RESOLUTION SUGGESTS THAT THE IMPUGN ED LEASE AGREEMENT IS CONDITIONAL AND HAS NOT REACHED TO THE FINALITY AND THEREFORE BOARD DECIDED TO TERMINATE THE LEASE AGREEMENT ACCO RDINGLY. 4.3.10 THE ADVANCE RECEIPTS FROM M/S. ABIR INVESTME NTS PVT. LTD. IN PURSUANCE OF SO-CALLED LEASE AGREEMENT WITH THE APP ELLANT COMPANY AND M/S. ABIR INVESTMENTS PVT. LTD., COULD NOT BE TREAT ED AS ACCRUED INCOME ASSESSABLE TO TAX DURING THE YEAR UNDER CONSIDERATI ON, SINCE SUCH ADVANCE RECEIPT WAS CHARGED WITH SEVERAL OBLIGATIONS WHICH THE APPELLANT WAS TO DISCHARGE AND M/S. ABIR INVESTMENTS PVT. LTD.. WAS ALSO REQUIRED TO BE DISCHARGED AS A PROPOSED CO-DEVELOPER BEFORE EXECUT ION OF THE FINAL LEASE DEED. THE APPELLANT COMPANY RELIED UPON THE DECISIO N OF HON'BLE SUPREME COURT IN THE CASE OF CALCUTTA CO. LTD. VS. CIT 37 I TR 1 AND THE DECISION ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 18 - OF HON'BLE ITAT, HYDERABAD 'A' BENCH IN THE CASE OF DCIT VS. SHAPOORJI PALLONJI BIOTECH PARK (P) LTD. 138 TTO'62, WHEREIN IT HAS BEEN HELD THAT ' THE A.O WAS NOT JUSTIFIED IN ASSESSING THE INCOME I N RESPECT OF SALE DEEDS EXECUTED AS IT WOULD NOT GIVE RISE TO ANY INCOME AS SESSABLE TO TAX DURING THE YEAR UNDER CONSIDERATION SINCE THE SAID INCOME WAS CHARGED WITH SEVERAL OBLIGATIONS WHICH THE ASSESSEE WAS TO DISCH ARGE BEFORE THE DELIVERY OF PLOTS TO THE BUYERS IN TERMS OF THE SAL E DEEDS ITSELF. THE ASSESSEE WAS OBLIGED TO CARRY ON VARIOUS DEVELOPMEN TAL WORKS NOT ONLY WITHIN THE SOLD PLOTS BUT ALSO TO PROVIDE THE COMMO N FACILITIES FOR THE ENTIRE PARK, AND THEN ONLY DELIVER THE POSSESSION O F THE PLOTS SOLD TO THE PARTIES. THE HON'BLE ITAT HYD., IN THE CASE CITED SUPRA HAS ALSO FOLLOWED THE PRINCIPLES LAID DOWN BY THE APEX CU7OU RT IN THE CASE OF CALCUTTA CO. LTD. VS. C1T 37 1TR 1. 4.11 NOW THE NEXT QUESTION ARISES WHETHER SIMPLY FO R THE REASON THAT THE APPELLANT COMPANY HAS BOOKED THE GAIN IN PREMATURIT Y IN ITS BOOKS OF ACCOUNT, WHETHER THE INCOME CAN BE TAXED. IT IS A S ETTLED LEGAL POSITION THAT SUCH INCOME CANNOT BE TAXED, AS HELD BY HON'BL E SUPREME COURT IN THE CASE OF CIT VS. SHOORJI VALLABHDAS AND HELD AS UNDER:- 'INCOME TAX IS A LEVY ON INCOME. THOUGH THE INCOME- TAX ACT TAKES INTO ACCOUNT TWO POINTS OF TIME AT WHICH THE LIABILITY T O TAX IS ATTRACTED, VIZ.. THE ACCRUAL OF THE INCOME OR ITS RECEIPT, YET THE S UBSTANCE OF THE MATTER IS THE INCOME. IT INCOME DOES NOT RESULT AT ALL, THERE CANNOT BE A TAX, EVEN THOUGH IN BOOK-KEEPING, AN ENTRY IS MADE ABOUT A 'H YPOTHETICAL INCOME' WHICH DOES NOT MATERIALIZE. WHERE INCOME HAS, IN FA CT, BEEN RECEIVED AND IS SUBSEQUENTLY GIVEN UP IN SUCH CIRCUMSTANCES THAT -IT REMAINS THE INCOME OF THE RECIPIENT, EVEN THOUGH GIVEN UP, THE TAX MAY BE PAYABLE. WHERE, HOWEVER, THE INCOME CAN BE SAID NOT TO HAVE RESULTE D AT ALL, THERE IS OBVIOUSLY NEITHER ACCRUAL NOR RECEIPT OF INCOME, EV EN THOUGH AN ENTRY TO THAT EFFECT MIGHT, IN CERTAIN CIRCUMSTANCES, HAVE B EEN MADE IN THE BOOKS OF ACCOUNT'1. 4.3.12 HOWEVER, FOR TAKING CARE OF SUCH BOOK PROFIT THE PROVISIONS U/S 115JB ARE THERE UNDER I.T ACT, 1961. ALL SUCH INCOM ES WHETHER' ACCRUED 'OR' NOT ACCRUED' BUT BOOKED IN THE BOOKS OF ACCOUN T ARE LIABLE FOR TAX U/S 115JB OF THE ACT AND ACCORDINGLY I HELD THAT THE AP PELLANT COMPANY IS ALSO LIABLE TO TAX ON SUCH BOOK PROFIT U/S 115JB OF THE ACT. 4.3.13. IT IS AN UNDISPUTED FACT THAT THE APPELLANT COMPANY HAS DURING THE YEAR GIVEN THE LAND ON LEASE FOR A PERIOD OF 99 YEA RS TO ABIR INVESTMENT PVT. LTD. AND NOT SOLD THE LAND. FURTHER, THE CONDI TIONS ABOUT OBTAINING VARIOUS STATUTORY PERMISSIONS HAVE NOT BEEN FULFILL ED. THE PROFIT ON SO- CALLED 'SALES TRANSACTIONS' IS PREMATURELY BOOKED I N THE BOOKS OF ACCOUNT WHICH IS AWAY FROM THE ACTUAL FACTS OF THE CASE. TH E RECEIPTS MADE BY APPELLANT COMPANY FROM ABIR INVESTMENT PVT. LTD. PA RTAKES THE NATURE OF ADVANCE RECEIPTS TOWARDS CONDITIONAL LEASE TRANSACT IONS RATHER THAN TO BE CONSIDERED IN THE NATURE OF REVENUE RECEIPTS, BECAU SE MOST OF THE CONDITIONS OF DEVELOPER AND CO-DEVELOPER ARE YET TO BE FULFILLED. THE RECEIPTS BY APPELLANT COMPANY HAVE NOT AT THE JUNCT URE OF ACCOUNTING IN THE BOOKS OF ACCOUNT, HAS CRYSTALLIZED IN THE NATUR E OF RECEIPT OR ACCRUAL OF INCOME. THE BOOKS OF ACCOUNT OF THE COMPANY ARE MAINTAINED ON MERCANTILE BASIS AND THE SAME ARE MANDATORY AS ENVI SAGED U/S 210 OF COMPANIES ACT, 1955. EVEN THE TAX AUDIT REPORT AND NOTES FORMING PART OF ACCOUNT AS STATED IN THE BALANCE SHEET CLEARLY S TATES THAT THE BOOKS OF ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 19 - ACCOUNT BY THE APPELLANT COMPANY ARE MAINTAINED BY FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. A PREMATURE ENTRY OF BOOKING THE PROFIT IN THE BOOKS OF ACCOUNT CANNOT BE A BASIS OF BEING TREATED AS 'I NCOME ACCRUED OR RECEIPT' AND THEREFORE, CONSEQUENTLY ALSO IT CANNOT BE A VALID BASIS FOR CLAIMING DEDUCTION U/S 80IAB. THE RELIANCE OF THE A PPELLANT ON VARIOUS JUDICIAL PRONOUNCEMENTS BY VARIOUS COURTS INCLUDING THAT OF APPEX COURT AS REFERRED SUPRA , FULLY SUPPORTS THE ALTERNATIVE CONTENTION OF THE APPELLANT. IN VIEW OF THE ABOVE REFERRED CLEAR CUT FACTS, DISCUSSIONS AND FINDING, I DIRECT THE AO TO TREAT THIS AMOUNT AS AD VANCE RECEIPT BEING CONTINGENT IN NATURE ON ACCOUNT OF NON-FUIFILLMENT OF PRESCRIBED CONDITIONS OF THE LEASE AGREEMENT VISA VIS RULES AN D REGULATION OF SEZ AND ACCORDINGLY THE SAME CANNOT BE ELIGIBLE FOR DEDUCTI ON U/S 80IAB, ALSO. 6.5 THE CIT(A) IN CONCLUSION HELD THAT THE AO WAS F ULLY JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE UNDER S.80IAB O F THE ACT AND CONSEQUENTLY CONFIRMED THE ACTION OF THE AO TOWARD SUCH DISALLOWANCE OF CLAIM. THE CIT(A) HOWEVER ACCEPTED THE ALTERNATIVE PLEA TOOK BY THE ASSESSEE BEFORE IT AND DIRECTED TH E AO TO TREAT THE REVENUE DECLARED FROM SEZ PROJECT AS MERE ADVANCE R ECEIPT NOT SUSCEPTIBLE TO TAXATION IN THE YEAR UNDER CONSIDERA TION ON ACCOUNT OF NON-FULFILLMENT OF THE MAJOR CONDITIONS OF THE LEAS E AGREEMENT QUA SEZ REGULATIONS. THE CIT(A) CONSEQUENTLY HELD THAT NOTWITHSTANDING REVENUE INCOME DECLARED BY THE ASSESSEE IN ITS BOOK S OF ACCOUNTS SUCH INCOME HAD NOT REALLY ACCRUED AND CRYSTALIZED DURIN G THE YEAR IN THE LIGHT OF FACTS AND THE JUDICIAL PRECEDENTS AVAILABL E IN THIS REGARD. THE TAXABLE INCOME OF THE ASSESSEE WAS THUS REDUCED TO THE EXTENT OF REVENUE INCOME ARISING FROM SEZ PROJECT AS CLAIMED BY THE ASSESSEE BEFORE IT. THE CIT(A) ALSO DIRECTED THE AO TO RE-C OMPUTE THE BOOK PROFIT UNDER S.115JB OF THE ACT IN CONSEQUENCE OF T HE ABOVE DIRECTIONS. 7. AGGRIEVED, THE REVENUE HAS PREFERRED APPEAL BEFO RE THE TRIBUNAL SEEKING TO ASSAIL THE ACTION OF CIT(A) WHEREBY SALE CONSIDERATION DECLARED BY THE ASSESSEE ITSELF AS REVENUE RECEIPTS IN ITS BOOKS WERE TREATED AS UNACCRUED ADVANCE RECEIPTS IN AGREEMENT WITH ALTERNATIVE PLEA OF THE ASSESSEE. ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 20 - 8. BY WAY OF ITS CROSS APPEAL, THE ASSESSEE HAS ALS O ASSAILED THE PARTIAL RELIEF GIVEN BY THE CIT(A) TO THE EXTENT OF ITS ALTERNATIVE PLEA UNDER NORMAL PROVISIONS OF THE ACT WHILE ADJUDICATI NG THE ISSUE. THE ASSESSEE IN ITS CROSS APPEAL HAS IMPUGNED THE ORDER OF THE CIT(A) IN NOT GIVING CATEGORICAL FINDING FOR EXCLUSION OF THE AFORESAID ADVANCE RECEIPT ARISING FROM LEASE TRANSACTIONS FOR THE PUR POSE OF DETERMINATION OF BOOK PROFIT UNDER S.115JB OF THE A CT IN CONSONANCE WITH ITS FINDINGS UNDER THE NORMAL PROVISIONS OF TH E ACT. 9. THE LEARNED CITDR FOR THE REVENUE RELIED UPON TH E ORDER OF THE AO AND SUBMITTED IN FURTHERANCE THAT THE AO HAS DEM ONSTRATED ON FACTS THAT THE CONDITIONS PRECEDENT FOR ELIGIBILITY OF DEDUCTION UNDER S.80IAB HAS NOT BEEN FULFILLED AND THEREFORE, THE D ISALLOWANCE OF CLAIM OF DEDUCTION UNDER S.80IAB WAS RIGHTLY SUSTAI NED BY THE CIT(A). THE LEARNED CITDR HOWEVER EXPRESSED DIS-SA TISFACTION ON THE ORDER OF THE CIT(A) FOR ENTERTAINING ALTERNATIV E PLEA OF THE ASSESSEE FOR TREATING THE SALE CONSIDERATION ARISIN G BY VIRTUE OF LONG TERM LEASE AS ADVANCE RECEIPT OF CONTINGENT NATURE AS CLAIMED BY THE ASSESSEE FOR THE PURPOSES OF NORMAL PROVISIONS OF T HE ACT. THE LEARNED CITDR POINTED OUT THAT THE ASSESSEE ITSELF HAS DECLARED THE CONSIDERATION ARISING FROM LEASE DEED AS REVENUE RE CEIPT CHARGEABLE TO TAX AND THEREFORE, THERE WAS NO WARRANT FOR THE CIT (A) TO TREAT THE SAME AS ADVANCE RECEIPT AND A RECEIPT NOT IN THE NA TURE OF INCOME. THE LEARNED CITDR FURTHER SUBMITTED THAT NOT ONLY T HE ASSESSEE HAS RECORDED THE ENTRIES AS REVENUE INCOME IN ITS BOOKS OF ACCOUNTS AND RECORDED LIABILITY OF AIPL FOR OUTSTANDING PAYMENT RECEIVABLE ON ACCOUNT OF LEASE DEED, THE CORRESPONDING LESSEE COM PANY HAVE ALSO RECORDED ENTRIES IN ITS BOOKS AS ACQUISITION OF LAN D FORMING PART OF THE FIXED ASSETS AND ALSO RECOGNIZED THE LIABILITY PAYA BLE TO ASSESSEE FOR OUTSTANDING AMOUNT OF LEASE CONSIDERATION IN THIS R EGARD. THEREFORE, THE TRANSACTION RECORDED BY THE ASSESSEE ITSELF IN A PARTICULAR MANNER ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 21 - DOES NOT WARRANT ANY EXCEPTION AS CLAIMED. IT WAS THUS CONTENDED THAT NO REASONS EXIST TO DEVIATE FROM THE DECLARED INTEN TIONS (AS REVENUE INCOME) OF THE ASSESSEE IN THIS REGARD. THE LEARNE D CITDR ACCORDINGLY SUBMITTED THAT THE SALE CONSIDERATION ( SUBJECT TO DEDUCTION OF COST OF LAND AND EXPENSES) REQUIRES TO BE TAXED AS ORDINARY PROFITS OF THE ASSESSEE DURING THE YEAR AS CLAIMED IN ITS A NNUAL ACCOUNTS AFTER RIGHTFUL DENIAL OF DEDUCTION UNDER S.80IAB OF THE A CT WRONGLY CLAIMED BY THE ASSESSEE. AS REGARDS RE-COMPUTATION OF BOOK PROFIT UNDER S.115JB OF THE ACT, THE LEARNED CITDR OBSERVED THAT THE ASSESSEE ITSELF HAS CONSIDERED THE ADVANCE RECEIPT AS PART O F STATEMENT OF PROFIT AND LOSS AND THEREFORE NO ADJUSTMENTS TO BOOK PROFI T ON ACCOUNT OF THE ADVANCE RECEIPT IS PLAUSIBLE AS CLAIMED IN THE CROS S APPEAL OF THE ASSESSEE ON THE ISSUE. THE CITDR ACCORDINGLY RELIE D UPON THE ORDER OF AO. 10. THE LEARNED AR FOR THE ASSESSEE, ON THE OTHER H AND, REITERATED VARIOUS SUBMISSIONS MADE BEFORE THE CIT(A) IN GREAT LENGTH. THE LEARNED AR FOR THE ASSESSEE POINTED OUT THAT IT IS ENGAGED IN THE BUSINESS OF DEVELOPING SEZ. THE ASSESSEE ENTERED I NTO AN AGREEMENT WITH PROPOSED LESSEE NAMELY AIPL AGAINST WHICH A RE FUNDABLE ADVANCE RECEIPT OF AN INSIGNIFICANT AMOUNT OF RS.1 CRORE ON LY WAS RECEIVED BY THE ASSESSEE COMPANY DURING THE YEAR AND BALANCE RS .103.23 CRORE WAS SHOWN AS ADVANCE RECEIVABLE IN THE BALANCE SHEE T AS ON 31.03.2008. AS PER THE MOU, AN AREA OF 6.28 ACRES OF LAND OUT OF TOTAL 26.08 ACRES LAND NOTIFIED AS SEZ BY THE CENTR AL GOVERNMENT WAS PROPOSED TO BE LEASED OUT FOR A REFUNDABLE ADVANCE OF RS.1,04,23,58,400/-. THE LESSEE HOWEVER WAS REQUIR ED TO BE APPROVED BY GOI AS A CO-DEVELOPER OF THE APPROVED SEZ PROJ ECT. ON SUCH TERMS, THE ASSESSEE UNDERTAKING RECORDED A PRE-MATU RE GAIN OF RS.97,72,11,000/- OVER THE COST OF THE PROPORTIONAT E PART OF THE AREA OF LAND PEGGED AT RS.6,51,47,400/- PROPOSED TO BE GIVE N TO THE PROPOSED ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 22 - CO-DEVELOPER AIPL FOR THE DEVELOPMENT OF SEZ PROJEC T OF THE ASSESSEE COMPANY PENDING APPROVAL OF THE AIPL AS CO-DEVELOPE R BY THE GOVERNMENT OF INDIA AS PER THE SEZ POLICY. 10.1 THE LEARNED AR SUBMITTED THAT THE AO WRONGLY T REATED THE PROPOSED LEASE DEED AGREEMENT (ON A 100 RUPEES STAM P PAPER) ENTERED INTO BETWEEN THE ASSESSEE COMPANY AND PROPOSED CO-D EVELOPER AIPL AS SALE OF VACANT LAND TO AIPL WHICH WAS ONLY IN TH E NATURE OF PROPOSED LEASE. THE MEMORANDUM OF UNDERSTANDING (M OU) IN THIS REGARD SOUGHT TO LAY DOWN BROAD TERMS AND CONDITION S OF THE OBLIGATIONS AND RIGHTS OF THE ASSESSEE COMPANY AS A LSO OF PROPOSED CO- DEVELOPER AIPL FOR APPROVAL OF LESSEE (AIPL) AS A C O-DEVELOPER OF THE SEZ PROJECT OF THE ASSESSEE COMPANY. IT WAS UNDERST OOD BETWEEN THE ASSESSEE (LESSOR) AND AIPL (LESSEE) THAT IF THE APP ROVAL OF AIPL IS NOT OBTAINED FROM THE GOVERNMENT OF INDIA AS A CO-DEVE LOPER FOR THE SEZ PROJECT, ASSESSEE COMPANY ALWAYS REMAINED UNDER SACROSANCT AND BINDING OBLIGATION TO REFUND THE AMOUNT OF ADVANCE RECEIVED FROM AIPL. IT WAS THUS CONTENDED THAT THE SO CALLED LEA SE AGREEMENT (MOU) WAS SQUARELY CONTINGENT UPON THE EVENT NAMELY APPROVAL OF LEASEE AS CO-DEVELOPER AND IN THE ABSENCE OF SANC TION FROM GOI, THE CONTRACT WAS TO BE REPUDIATED. 10.2 THE LEARNED AR FOR THE ASSESSEE THEREFORE ADVE RTED TO THE PROVISIONS OF SECTION 80IAB OF THE ACT IN JUSTIFICA TION OF ELIGIBILITY OF ITS CLAIM AND CONTENDED THAT THE ASSESSEE REQUIRES TO BE A DEVELOPER ENGAGED IN THE BUSINESS OF DEVELOPING SEZ AND THE D EDUCTION AS PER SUB-SECTION (2) OF S.80IAB OF THE ACT IS ELIGIBLE A T THE OPTION OF THE ASSESSEE BEGINNING FROM THE YEAR IN WHICH SEZ HAS B EEN NOTIFIED BY THE CENTRAL GOVERNMENT. DELINEATING FURTHER, THE L EARNED AR CANVASSED THAT THE GROSS TOTAL INCOME OF THE ASSESS EE DEVELOPER SHOULD INCLUDE PROFIT AND GAINS DERIVED FROM ANY BUSINESS OF DEVELOPING SEZ ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 23 - AND SUCH SEZ SHOULD HAVE BEEN NOTIFIED ON OR AFTER FIRST APRIL, 2005 UNDER SEZ ACT, 2005. THE LEARNED AR THUS STRONGLY HARPED THAT BEGINNING FROM THE YEAR IN WHICH THE SEZ PROJECT IS NOTIFIED, THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER S.80IAB OF THE ACT COMPUTING ITS INCOME FOR TEN CONSECUTIVE ASSESSMENT YEARS. I N THIS CONTEXT, THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAS OBTAINED FORMAL APPROVAL FOR 10.38 HECTARES FROM THE GOVERNMENT OF INDIA ON 20 TH DECEMBER, 2006 AND FORMAL APPROVAL FOR ANOTHER 21.11 HECTARES WAS RECEIVED ON 22.06.2007 FROM THE GOVERNMENT OF INDIA FOR DEVELOP ING IT/ITES SEZ. THE LEARNED AR THUS SUBMITTED THAT LAND IN MO U WAS DULY NOTIFIED AS SEZ BY THE GOVERNMENT OF INDIA WHICH IS ONE OF THE REQUIRED CONDITIONS UNDER S.80IAB OF THE ACT. ADVE RTING TO THE SECOND LIMB OF CONTENTION, THE LEARNED AR POINTED O UT THAT REQUIREMENT ENVISAGED IS THAT PROFIT AND GAIN SHOUL D BE DERIVED BY AN UNDERTAKING FROM ANY BUSINESS OF DEVELOPING SEZ IN TERMS OF SECTION 80IAB OF THE ACT. IN THIS CONTEXT, THE LEARNED AR SUBMITTED THAT IT IS NOT THE REQUIREMENT OF THE PROVISION THAT TO ENABLE CLAIM OF DEDUCTION UNDER S.80IAB OF THE ACT, THE SEZ SHOULD BE DEVELOP ED FULL-FLEDGED AND TO BECOME FUNCTIONAL AT ITS FULLEST CAPACITY. THE ASSESSEE WOULD BE ENTITLED TO AVAIL BENEFIT OF SECTION 80IAB OF TH E ACT EVEN WHILE DEVELOPMENT OF SEZ IS IN PROGRESS WHERE THE ASSESSE E IS ABLE TO DEMONSTRATE THE BUSINESS CONNECTION OF THE INCOME E ARNED IN THE PROCESS OF DEVELOPING SEZ. THE LEANED AR CONTENDED THAT INTENTION TO GRANT DEDUCTION TO AN UNDERTAKING WHICH DEVELOPS THE SEZ IS PARAMOUNT AND THEREFORE ANY INCOME ARISING IN THE C OURSE OF DEVELOPMENT OF SEZ IS ENTITLED TO WEIGHT AND IS ELI GIBLE FOR DEDUCTION. 10.3 THE LEARNED AR FURTHER MARSHALED A PLEA WITH R EFERENCE TO SECTION 80IAB OF THE ACT THAT IT PROVIDES FOR ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING FROM ANY BUSINESS OF DEVE LOPING SEZ IN CONTRAST TO EXPRESSION DERIVED FROM INDUSTRIAL UND ERTAKING WHICH HAS ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 24 - BEEN USED BY THE STATUTE IN OTHER PROVISION GRANTIN G DEDUCTION SUCH AS 80I ETC. 10.4 THE LEARNED AR SUBMITTED THAT A NARROWER OR RE STRICTED MEANING CANNOT BE GIVEN TO ANY PROFIT AND GAINS ATTRIBUTABL E TO DEVELOPING A SEZ. THE LEARNED AR SUBMITTED THAT THE STAGE OF DE VELOPING THE SEZ HAD BEGUN WITH THE NOTIFICATION OF LAND IN QUESTION AS SEZ BY GOVERNMENT OF INDIA (GOI). THE LEARNED AR THUS SUB MITTED THAT IN VIEW OF 80IAB(2) OF THE ACT, THE ASSESSEE IS FULLY ENTITLED FOR DEDUCTION ONCE SEZ HAS BEEN NOTIFIED AND BEGINNING OF OPERATION IN SEZ HAS BEEN PER SE IS NOT REQUIRED. THE LEARNED AR THUS CONTENDED THAT SALE OF VACANT LAND NOTIFIED AS SEZ IS THUS PR OFIT AND GAINS ARISING FROM DEVELOPING SEZ AS CONTEMPLATED UNDER S.80IAB O F THE ACT. THE LEARNED AR THUS SUBMITTED THAT BOTH LOWER AUTHORITI ES WERE NOT JUSTIFIED IN DENYING THE DEDUCTION RIGHTFULLY CLAIM ED BY THE ASSESSEE. 10.5 THE LEARNED AR FURTHER FOUND FAULT WITH ONE OF THE OBJECTION RAISED ON BEHALF OF THE REVENUE THAT THE LAND LEASE D OUT TO AIPL WAS NOT APPROVED BY THE DEVELOPMENT COMMISSIONER AND TH EREFORE, THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION ON SALE OF S UCH LAND. IN THIS CONTEXT, THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAS NOT SOLD THE LAND AS WRONGLY INFERRED ON BEHALF OF THE REVENUE. THE NOTIFIED LAND HAS ONLY BEEN PROPOSED TO BE LEASED OUT TO AIPL VID E MOU/AGREEMENT DATED 26 TH JUNE, 2007. THE LEARNED AR CONTENDED THAT AS PER SEZ ACT, 2005 AND RULES THEREUNDER, IT WAS PERMISSIBLE FOR T HE ASSESSEE TO LEASE OUT THE UNDIVIDED LAND TO THE PROPOSED CO-DEVELOPER WHO INTEND TO CREATE INFRASTRUCTURE FACILITIES IN THE ZONE WITHOU T PRIOR APPROVAL OF DEVELOPMENT COMMISSIONER. THE APPLICATION WAS MADE TO THE CENTRAL GOVERNMENT FOR ADDITION OF AIPL AS A CO-DEVELOPER O F SEZ PROJECT. THE LEARNED AR THUS SUBMITTED THAT IN THE LIGHT OF SUBSECTION (2) OF SECTION 80IAB OF THE ACT, THE ASSESSEE IS SUFFICIEN TLY ENTITLED FOR ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 25 - CLAIM OF DEDUCTION ON PROFIT AND GAINS AS SOON AS T HE SEZ IS NOTIFIED EVEN WHILE THE DEVELOPMENT PROCESS HAS NOT COMPLETE D. THE LEARNED AR CANVASSED THAT THE IMPORTANT DIFFERENCE BETWEEN THE LANGUAGE EMPLOYED UNDER S.80IAB OF THE ACT AND OTHER DEDUCTI ON PROVISIONS REQUIRES TO BE NOTED IN THE LIGHT OF SECTION 80IAB( 2) OF THE ACT IN TERMS OF WHICH THE ASSESSEE IS ENTITLED TO CLAIM DE DUCTION FOR SPECIFIED NUMBER OF YEARS BEGINNING FROM YEAR IN WHICH AN SEZ HAS BEEN NOTIFIED BY THE CENTRAL GOVERNMENT. THUS, WHERE THE ASSESSEE IN THE INSTANT CASE HAS DEMONSTRATED THAT LAND IN QUESTION HAS BEEN NOTIFIED FOR THE PURPOSES OF SEZ, THE ASSESSEE FULFILLS ITS ENTITLEMENT TO DEDUCTION UNDER S.80IAB OF THE ACT NOTWITHSTANDING CONTINUATION OF OTHER PROCESSES FOR DEVELOPMENT OF SEZ, THERE WAS N O JUSTIFICATION TO DENY THE DEDUCTION SO CLAIMED. 10.6 WITH REFERENCE TO NON-COMPLIANCE OF SEZ RULES ALLEGED ON BEHALF OF REVENUE, THE LEARNED AR CONTENDED THAT TH E AO HAS WRONGLY INTERPRETED AND COMPARED THE ACTION OF PROPOSED LEA SING OUT THE LAND AS A SALE OF THE LAND. IT WAS CONTENDED THAT THE A SSESSEE HAS NOT SOLD THE LAND BUT HAS ONLY PROPOSED TO LEASE OUT THE NOT IFIED LAND TO AIPL SUBJECT TO CONDITIONS MOU/AGREEMENT DATED 26TH JUNE , 2007. THE LEARNED AR REFERRED TO THE SEZ ACT AND RULES AND SU BMITTED THAT IT IS TRUE THAT IT IS NOT PERMISSIBLE TO SALE A PART OF N OTIFIED LAND TO AIPL AND IT IS ONLY PERMISSIBLE TO SALE THE LAND TO THE UNDERTAKING APPROVED BY THE DEVELOPMENT COMMISSIONER. THE ASSESSEE SUBM ITTED THAT IT IS HOWEVER VERY WELL PERMISSIBLE WITHIN THE FOUR CORNE RS OF SEZ ACT TO LEASE OUT NOTIFIED LAND TO A PROPOSED CO-DEVELOPER WHO INTENDS TO CREATE INFRASTRUCTURE FACILITIES. IT WAS SUBMITTED THAT AS PER RULE 10(8) OF THE SEZ RULES, 2006, THE ASSESSEE DEVELOPER WAS ENTITLED TO ALLOT THE LAND IN PROCESSING AREA ON LEASE BASIS TO A PER SON DESIRING TO CREATE INFRASTRUCTURE FACILITIES FOR USE BY PROSPECTIVE UN IT WHICH IS WHAT HAS BEEN DONE BY THE ASSESSEE. THE LEARNED AR THUS SUB MITTED THAT WHILE ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 26 - AN ENTREPRENEUR WANTING TO SET UP A UNIT IN SEZ THE N AS PER THE SEZ RULES 10(6)/(7), PERMISSIONS OF DEVELOPMENT COMMISS IONER WOULD HAVE BEEN REQUIRED BUT HOWEVER, THE LESSEE AIPL IS ONLY A PROPOSED CO-DEVELOPER AND NOT A PROSPECTIVE UNDERTAKING. NO CONDITIONS OF SEZ ACT AND RULES THEREUNDER IS THUS VIOLATED. IN THE CIRCUMSTANCES, THE GAINS ARISING FROM THE LEASING OUT OF LAND IN N OTIFIED SEZ IS WITHOUT ANY BREACH OF RULES AND THUS IS ELIGIBLE FO R DEDUCTION UNDER S.80IAB OF THE ACT WITHOUT ANY FETTERS. THE LEARN ED AR ALSO POINTED OUT THAT A BOND-CUM-LEGAL UNDERTAKING REQUIRED TO B E EXECUTED WITH THE DEVELOPMENT COMMISSIONER IS ONLY PROCEDURAL IN NATURE. SUCH BONDS HAD BEEN DULY EXECUTED ON 28.11.2008. IT WAS FURTHER SUBMITTED THAT SECTION 80IAB OF THE ACT DOES NOT REQUIRE THE COMPULSORY EXECUTION OF ALL FORMALITIES FOR THE PURPOSES OF CA RRYING ON THE DEVELOPMENT WORK. THE LEARNED AR REITERATED THAT B ENEFIT OF SECTION 80IAB WOULD COMMENCE AT THE OPTION OF THE ASSESSEE IMMEDIATELY FROM THE BEGINNING OF THE YEAR IN WHICH SEZ HAS BEE N NOTIFIED AND THUS, NO STRINGS ARE ATTACHED FOR CLAIM OF DEDUCTIO N. IN ESSENCE, THE LEARNED AR SUBMITTED THAT IT IS NOT THE REQUIREMENT OF THE SCHEME OF THE ACT THAT DEVELOPMENT WORK SHOULD BE COMPLETED B UT ON THE CONTRARY, THE BENEFIT OF SECTION 80IAB IS DEPENDENT UPON NOTIFICATION OF SEZ ALONE. 10.7 THE LEARNED AR THEREAFTER ADVERTED TO ANOTHER OBSERVATION OF THE AO TO THE EFFECT THAT IN THE BOOKS OF ACCOUNTS, THE ASSESSEE HAS TREATED THE TRANSACTION OF LEASE AS A TRANSACTION OF SALE O F LAND WHICH SALE IS WITHOUT PERMISSION OF DEVELOPMENT OFFICER SEZ IS A VIOLATION OF PROVISION OF SEZ ACT AND HENCE, INCOME EARNED OUT O F SUCH ACTIVITY CANNOT BE QUALIFIED FOR DEDUCTION UNDER S.80IAB OF THE ACT. IN REBUTTAL OF THE AFORESAID OBJECTION OF THE AO, THE ASSESSEE POINTED OUT THAT IT IS WELL SETTLED LAW THAT TREATMENT GIVEN IN THE BOOKS OF ACCOUNTS IS NOT DECISIVE FOR DETERMINING A PARTICULAR CHARAC TER OF INCOME. THE ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 27 - TRANSACTION WAS INTENDED FOR LEASE OF LAND IN SUBST ANCE WITH A VIEW TO INDUCT THE LESSEE AS CO-DEVELOPER SUBJECT TO NECESS ARY APPROVALS FROM COMPETENT AUTHORITY. IT WAS FURTHER OBSERVED THAT A TRANSACTION OF LEASE FOR THE USER OF LAND IS OUTSIDE THE PURVIEW O F AS-19 ISSUED BY ACCOUNTING BODY ICAI. THE LEARNED AR THUS CONTENDE D THAT NO FAULT COULD BE FOUND WITH THE PRIMARY CLAIM OF DEDUCTION UNDER SECTION 80IAB ADVANCED BY THE ASSESSEE. 11. BESIDES THE AFORESAID PLANK, THE LEARNED AR THE REAFTER ALSO SUBMITTED THAT WITHOUT PREJUDICE TO THE CLAIM OF DE DUCTION OF SECTION 80IAB, THE AMOUNT OF ADVANCE RECEIVED/RECEIVABLE FR OM THE PROPOSED CO-DEVELOPER AIPL WITH REFERENCE TO THE PROPOSED LE ASE IS NOT A REAL INCOME OF THE ASSESSEE. IT WAS ASSERTED THAT THE A FORESAID TRANSACTION IS ONLY IN THE NATURE OF ADVANCE BESET WITH AN INHE RENT LIABILITY OF THE ASSESSEE COMPANY TO REFUND THE SAID ADVANCE RECEIPT IF THE ASSESSEE FAILS TO OBTAIN THE APPROVAL FROM THE GOVERNMENT FO R INDUCTION OF THE AIPL AS A CO-DEVELOPER FOR THE PART OF THE LAND OF THE PROPOSED SEZ PROJECT. 11.1 NUDGING THE ALTERNATIVE BUT A SIGNIFICANT CONT ENTION, THE LEARNED AR FOR THE ASSESSEE MARSHALED THAT THE ADVANCE RECE IVED FROM AIPL IN PURSUANCE OF LEASE AGREEMENT IS MERELY AN ADVANCE R ECEIPT AT THIS STAGE AND NOT SUSCEPTIBLE TO TAX. SUCH ADVANCE CAN NOT BE REGARDED AS ACCRUED INCOME OR ANY EARNED INCOME TILL THE TIME, SUBSTANTIVE CONDITIONS MOU ARE FULFILLED. IT WAS ONCE AGAIN RE ITERATED THAT THE SAID PART OF SEZ LAND TO BE GIVEN TO AIPL ON LEASE AS CO-DEVELOPER WAS SUBJECT TO AN APPROVAL OF THE GOI. IT WAS UNDE RSCORED THAT THE LEASE DEED WITH AIPL WAS CONDITIONAL AND EXISTENTIA L UPON FULFILLMENT OF SUBSTANTIVE CONDITIONS. THE LEASE DEED COULD BE EFFECTED ON FULFILLMENT OF OBLIGATIONS WHICH IS ESSENTIALLY DEP ENDENT UPON THE APPROVAL OF THE PROPOSED CO-DEVELOPER AIPL BY THE C OMPETENT ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 28 - AUTHORITY OF THE GOI. IT WAS FURTHER POINTED OUT T HAT THE PROPOSED LESSEE WAS TO PAY ADVANCE TO THE ASSESSEE AS AGREED UPON BUT IT WAS SIMULTANEOUSLY ALSO AGREED THAT THE ASSESSEE DEVELO PER SHALL RETURN THE EARNEST MONEY SO RECEIVED WITH INTEREST IF THE AGRE EMENT IS TERMINATED OWING TO NON-FULFILLMENT OF OBLIGATIONS AND WHERE T HE APPROVAL OF AIPL IS NOT GRANTED AS CO-DEVELOPER BY THE COMPETEN T AUTHORITY UNDER SEZ ACT, 2005. IT WAS AN OBLIGATION OF THE ASSESSE E TO PROCURE THE APPROVAL OF THE CO-DEVELOPER FOR AND ON BEHALF OF T HE PROPOSED LESSEE. IT WAS THUS CONTENDED THAT ON A HOLISTIC READING OF TERMS AND CONDITIONS OF THE LEASE AGREEMENT, IT WOULD BE CRYS TAL CLEAR THAT IT IS NOT FORMAL LEASE DEED WHEREBY THE LEASEHOLD RIGHTS OF THE PART OF THE LAND OF SEZ PROJECT STOOD ASSIGNED IN FAVOUR OF AIP L AND THE EXECUTION OF FORMAL LEASE DEED WAS TO FOLLOW ON FUL FILLMENT OF THE SUBSTANTIVE CONDITIONS LAID DOWN IN THE SO CALLED L EASE AGREEMENT WHEREIN THE OBLIGATION OF BOTH PARTIES HAVE BEEN SP ECIFIED. 11.2 IT WAS ALSO POINTED OUT THAT THE IMPUGNED LEAS E DEED RELIED UPON BY THE AO FOR THE PURPOSES OF CHARGEABILITY OF INCO ME ARE NOT REGISTERED AND THE TERMS HAVE BEEN SIMPLY PUT ON 10 0 RUPEES STAMP PAPER. THE SAID LAND OF THE NOTIFIED SEZ PROJECT O F THE ASSESSEE CONTINUES TO STAND IN THE NAME OF THE ASSESSEE IN T HE LAND REVENUE RECORDS. AS POINTED OUT TO THE REVENUE AUTHORITIES IN THE ASSESSMENT AND APPELLATE PROCEEDINGS, THE LEASEHOLD RIGHTS IN THE SAID LAND HAS NOT BEEN CREATED IN THE NAME OF AIPL ON THE LAND REVENU E RECORDS OF THE GOVERNMENT NOR HAS THE FULL PAYMENT BEEN RECEIVED A S AGREED UPON AND THEREFORE, UNDER NO CIRCUMSTANCES, IT COULD BE TREATED AS SALE OF LAND AS LABELED BY THE AO. IT WAS ALSO POINTED OUT THAT THE POSSESSION OR ENJOYMENT OF THE SAID LAND HAS NOT BEEN PARTED T O AIPL EITHER AND THEREFORE, IN TERMS OF SECTION 2(47) OF THE ACT, TH E SO CALLED UNREGISTERED LEASE AGREEMENT CANNOT CAUSE ANY TRANS FER/SALE OF THE LAND FOR THE PURPOSES OF CHARGEABILITY UNDER THE IN COME TAX ACT. ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 29 - 11.3 IT IS THUS CONTENDED THAT WHEN THE TRANSACTION OF LEASE ITSELF IS CONDITIONAL AND CONTINGENT UPON STARK OBLIGATIONS T O BE FULFILLED FOR AGREEMENT TO COME INTO EFFECT, THE INCOME THEREFROM COULD BE RECOGNIZED IN LAW ONLY WHEN THE CONDITIONS OF THE A GREEMENT ARE FULFILLED. IT WAS SUBMITTED THAT WHERE IN THE FACT S OF THE PRESENT CASE, THE REGULATORY APPROVALS AND FORMALITIES WERE ADMIT TEDLY PENDING, THE PROPOSED LEASE AGREEMENT COULD NOT BE GIVEN EFFECT TO AND NO PART OF THE RECEIPT COULD BE TREATED AS CERTAIN OR REAL INC OME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THE WHOLE OF REC EIPTS ARISING FROM SUCH AGREEMENT WOULD PARTAKE THE CHARACTER OF INCO ME ONLY IN THE YEAR OF FULFILLMENT OF TERMS AND CONDITIONS AS STIP ULATED IN THE LEASE AGREEMENT. IT WAS THUS SUBMITTED THAT REFUNDABLE A DVANCE OF RS.1,04,23,58,400/- RECOGNIZED BY THE ASSESSEE AS S ALE REVENUE AND CONSEQUENT GAIN OF RS.97,72,11,000/- FROM SEZ PROJE CT IS INTRINSICALLY AN UNACCRUED INCOME WITH A CORRESPONDING LIABILITY FOR RETURN OF THE SAME AND THUS COULD NOT BE TAXED IN THE YEAR UNDER CONSIDERATION. 11.4 THE LEARNED AR THEREAFTER SUBMITTED A TABULATE D STATEMENT OF AMOUNT RECEIVED OVER A PERIOD OF TIME BEGINNING FRO M 03.10.2007 TO 25.02.2011 AGGREGATING TO RS.148 CRORE FROM AIPL. THE LEARNED AR SUBMITTED THAT ONLY A FRACTIONAL AMOUNT OF RS.1CROR E WAS RECEIVED BY THE ASSESSEE WITH REFERENCE TO THE AFORESAID PROPOS ED LEASE DURING THE AY 2008-09 IN QUESTION. THE LEARNED AR SUBMITTED O N FACTS THAT WHILE THE REVENUE FROM THE PROPOSED LEASE WAS RECOG NIZED AS INCOME FROM SEZ PROJECT, THE ASSESSEE HAS ALSO RECOGNIZED CORRESPONDING RECEIVABLE FROM AIPL TO THE TUNE OF RS.103.23CRORES DURING THE YEAR. 11.5 THE LEARNED AR THEREAFTER REFERRED TO ANOTHER TABULATED STATEMENT OF RE-PAYMENT OF ADVANCE TO AIPL IN FY 20 14-15 TO THE TUNE OF RS.147 CRORES IN AGGREGATE AS CALLED FOR BY THE TRIBUNAL IN THE COURSE OF HEARING. PLACING RELIANCE ON THE SUBSEQU ENT HAPPENINGS OF ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 30 - THE MONEY RECEIVED AND EVENTUALLY RETURNED, THE LE ARNED AR JUSTIFIED ITS CASE THAT THE AMOUNT RECEIVED WAS MERELY ON ADV ANCE WHICH WAS ULTIMATELY REFUNDED TO AIPL OWING TO NO HEADWAY IN THE APPROVAL OF THE PROPOSED LEASE AND CONSEQUENT INDUCTION OF AIPL AS CO-DEVELOPER IN THE SEZ PROJECT. 11.6 THE LEARNED AR THEREAFTER REFERRED TO THE DECI SION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SHIVALIK BUILDWELL (P.) LTD. [2013] 40 TAXMANN.COM 219 (GUJ) & PARAS BUILDTECH I NDIA (P.) LTD. VS. CIT [2016] 382 ITR 630 (DELHI) FOR THE PROPOSIT ION THAT RECEIPT OF ADVANCE OR BOOKING AMOUNT PER SE COULD NOT BE TREATED AS TRADING RECEIPT OF THE YEAR UNDER CONSIDERATION WHERE THE P ROJECT NEVER TOOK PLACE AND PART OF ADVANCE WAS RETURNED IN THE ENSUI NG FINANCIAL YEAR. IT WAS THUS SUBMITTED THAT THE AMOUNT OF ADVANCE WI THOUT ITS BECOMING LEGALLY DUE TO ASSESSEE COULD NOT BE TAXED AS ACCRU ED INCOME IN THE HANDS OF THE ASSESSEE IN VIEW OF EXPRESS JUDICIAL F IAT ENUNCIATING THE POSITION OF LAW. 11.7 THE LEARNED AR FOR THE ASSESSEE THUS ESSENTIAL LY SUBMITTED THAT THE MOU EXECUTED FOR PROPOSED LEASE IS CONTINGENT O N A SUBSTANTIAL CONDITION I.E. APPROVAL FROM THE GOI FOR INCLUSION OF THE PROPOSED LEASE AS A CO-DEVELOPER FOR THE PART OF THE LAND OF THE PROPOSED SEZ PROJECT AS PER SEZ ACT, 2005, THE ASSESSEE IS UNDER OBLIGATION TO RETURN THE ADVANCE MONEY TOGETHER WITH INTEREST IN CASE THE SUBSTANTIVE CONDITION ALONGWITH OTHER CRUCIAL CONDITIONS ARE NO T MADE AND THE MOU DO NOT CULMINATE INTO FORMAL LEASE AGREEMENT. THE LEARNED AR THUS EMPHATICALLY CLAIMED THAT RECEIPT OF AMOUNT BY WAY OF ADVANCE IN RESPECT OF DEVELOPMENT OF SEZ IN PURSUANCE OF SO CA LLED LEASE AGREEMENT CANNOT BE TREATED AS ACCRUED INCOME IN THESE FACTS AND THUS CANNOT BE ASSESSED TO TAX FOR THE YEAR UNDER C ONSIDERATION AS EXPLAINED ABOVE NOTWITHSTANDING BOOK ENTRIES MADE I N DISREGARD OF ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 31 - REAL INCOME THEORY. AS POINTED OUT, MERE ENTRY IN THE BOOKS OF ACCOUNTS CANNOT BE RELIED UPON TO DETERMINE WHETHER INCOME HAS, IN FACT, RESULTED OR MATERIALIZED IN FAVOUR OF THE ASS ESSEE WHEN VIEWED IN THE BACKGROUND OF COMMERCIAL AND BUSINESS REALIT IES. THE UNREALISTIC AND ILLUSORY INCOME RECOGNIZED BY THE A SSESSEE IS CONTRARY TO THE WELL ESTABLISHED CONCEPT OF REAL INCOME AND THUS CANNOT BROUGHT TO TAX AS RIGHT TO RECEIVE MONEY STIPULATED IN THE LEASE AGREEMENT DID NOT ACCRUE IN FAVOUR OF THE ASSESSEE. IT WAS POINT ED OUT WITH REFERENCE TO THE DECISION OF THE HONBLE SUPREME COURT IN CIT VS. SHOORJI VALLABHDAS & CO. [1962] 46 ITR 144 (SC) & KEDARNATH JUTE MFG. CO. LTD. [1971] 82 ITR 363 (SC) THAT ACKNOWLEDGEMENT OF INCOME IN THE BOOKS OF ACCOUNTS ARE NOT CONCLUSIVE AND WHAT IS TO BE TAXED IS ONLY THE REAL INCOME. 11.8 SUMMARIZING THE FACTUAL POSITION, THE LEARNED AR FOR THE ASSESSEE THUS SUBMITTED THAT IN THE ADVANCE RECEIVE D FROM AIPL IN PURSUANCE OF MOU IS MERELY AN ADVANCE RECEIPT AND I S NOT ACCRUED IN THE HANDS OF THE ASSESSEE AS AN EARNED INCOME FOR T HE REASON THAT THE APPROVAL OF THE SAID COMPANY AS CO-DEVELOPER COULD NOT BE RECEIVED FROM GOI. WITH REFERENCE TO THE MOU/LEASE AGREEMEN T, THE LEARNED AR FOR THE ASSESSEE SOUGHT TO POINT OUT THAT THE SA ID LAND OF THE NOTIFIED SEZ PROJECT OF THE ASSESSEE IS STILL STAND ING IN THE NAME OF THE ASSESSEE IN THE LAND REVENUE RECORDS FOR WHICH SUPP ORTING EVIDENCES WERE PLACED BEFORE THE LOWER AUTHORITIES. THE SO C ALLED LEASE AGREEMENT IS NOT REGISTERED AND THE LEASEHOLD RIGHT S IN THE SAID LAND HAS NOT BEEN CREATED IN THE NAME OF AIPL ON THE LAN D REVENUE RECORDS AND THEREFORE THE TRANSACTION CANNOT BE TREATED AS SALE OF LAND AS MIS- APPRECIATED BY THE AO IN THE ASSESSMENT ORDER. IT WAS ALSO SOUGHT TO EXPLAIN THAT THE ENJOYMENT OF THE SAID LAND OF THE NOTIFIED SEZ WAS ALSO NOT GIVEN TO AIPL AND THEREFORE, NO TRANSFER/S ALE OF LAND CAN BE ENVISAGED AS PER THE PROVISIONS OF THE ACT. IN ESS ENCE, THE LEARNED AR ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 32 - ATTEMPTED TO CLAIM THAT ADVANCE RECEIVED BY THE ASS ESSEE WHICH IS CONTINGENT AND CONDITIONAL UPON FULFILLMENT OF OBLI GATIONS ASSOCIATED TO THE AGREEMENT CANNOT BE TAXED AS INCOME NOTWITHS TANDING ITS INCORRECT RECOGNITION AS INCOME IN THE BOOKS. THE LEARNED AR ADVERTED TO FACTUAL ASPECTS TO SAY THAT THE ASSESSE E HAS MERELY RECEIVED RS.1 CRORE DURING THE YEAR ONLY WHEREAS THE SALE CO NSIDERATION WAS RECOGNIZED AT STAGGERING AMOUNT OF RS.1,04,23,58,40 0/-. AS A COROLLARY, THE ASSESSEE HAS SHOWN OUTSTANDING RECEI VABLE OF RS.1,03,23,58,400/-. THE NET INCOME FROM SEZ PROJE CT WAS RECOGNIZED AT RS.97,72,11,000/- WITHOUT THE ACTUAL RECEIPT OF AMOUNT AND WITHOUT FULFILLMENT OF OBLIGATIONS AND CONDITIO NS OF SUBSTANTIAL LEASE HAS NEITHER ACCRUED NOR RECEIVED BY THE ASSES SEE AND THEREFORE CANNOT BE TAXED AS INCOME. BESIDES, AS CONTENDED, THE ADVANCE RECEIVED OVER YEARS IN PURSUANCE OF THE MOU WAS ULT IMATELY RETURNED OWING TO NON-FULFILLMENT OF SUBSTANTIVE CONDITIONS ASSOCIATED TO THE MOU WHICH FURTHER FORTIFIES ITS CLAIM OF RECEIPT BE ING CONTINGENT IN NATURE. 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS ON THE ISSUE AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND MATERIAL PLACED ON RECORD. THE REVENUE HAS CHALLENGED THE CONCLUSION OF THE CIT(A) FOR NON-TAXABILITY OF INCOME DECLARED FROM SEZ PROJECT. IT IS THE CASE OF THE REVENUE THAT THE ASSESSEE HAS WRONGLY CLAIMED D EDUCTION UNDER SEZ PROJECT TOWARDS INCOME ARISING FROM SALE OF LAN D IN NOTIFIED SEZ BY THE ASSESSEE WITHOUT FULFILLING THE CONDITIONS S TIPULATED FOR ENTITLEMENT OF DEDUCTION. THE ASSESSEE, ON THE OTH ER HAND, CONTENDS THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER S .80IAB OF THE ACT AS CLAIMED AND IN THE ALTERNATIVE ALSO CONTENDS THAT N O INCOME CAN BE SAID TO BE ACCRUED AT ALL IN THE FACTS OF THE CASE AND THEREFORE, INCOME ALTHOUGH DECLARED WRONGLY IN THE BOOKS (WITHOUT ITS ACCRUAL) IS NOT SUSCEPTIBLE TO TAX ON THE GROUNDS OF REAL INCOME TH EORY. ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 33 - 12.1 THE ASSESSEE IN THE INSTANT CASE AS ENTERED IN TO AN MOU/LEASE AGREEMENT WITH A LESSEE AIPL IN FY 2007-08 FOR LEAS ING OUT CERTAIN AREA OF NOTIFIED LAND TO AIPL SUBJECT TO ONE OF THE MAJOR CONDITIONS THAT AIPL WOULD BE GRANTED APPROVAL AS CO-DEVELOPER BY THE CENTRAL GOVERNMENT. IT WAS UNDERSTOOD THAT IN THE EVENT OF NOT GETTING THE APPROVAL FROM THE GOI FOR ANY REASON, THE AGREEMENT WOULD STAND TERMINATED AND THE ASSESSEE COMPANY SHALL RETURN TH E ADVANCE AMOUNT RECEIVED FROM AIPL ALONGWITH INTEREST @ 6% P.A. TH E ASSESSEE HAS RECEIVED ONLY A TOKEN AMOUNT OF RS.1 CRORE DURING T HE YEAR AGAINST THE TOTAL CONSIDERATION DETERMINED AT RS.1,04,23,58,400 /- AND THUS THE MAJORITY OF THE AMOUNT REMAINS OUTSTANDING IN THE B OOKS OF ACCOUNT OF THE ASSESSEE AS A DEBT RECEIVABLE FROM LESSEE AND S IMILAR OUTSTANDING HAS BEEN RECORDED AS CURRENT LIABILITIES IN THE COR RESPONDING BOOKS OF ACCOUNTS OF LESSEE AIPL PAYABLE TO ASSESSEE. 12.2 THE ASSESSEE HAS PROCEEDED TO DECLARE INCOME F ROM SEZ PROJECT TO THE TUNE OF RS.97,72,11,000/- AFTER REDUCING THE COST OF LAND IN LEASE AMOUNTING TO RS.6,51,47,400/- FROM THE SAID C ONSIDERATION DETERMINED BASED ON SUCH TENTATIVE AND CONDITIONAL LEASE AGREEMENT NOTED ABOVE. THE ASSESSEE HAS CLAIMED DEDUCTION UN DER S.80IAB OF THE ACT OF THE AFORESAID AMOUNT OF RS.97.72 CRORES ON THE PREMISE THAT THE DEDUCTION OF PROFITS ARISING FROM BUSINESS OF D EVELOPING SEZ IS AVAILABLE TO THE ASSESSEE BEGINNING FROM THE YEAR I N WHICH SEZ HAS BEEN NOTIFIED BY THE CENTRAL GOVERNMENT. IT IS THE CASE OF THE ASSESSEE THAT THE ASSESSEE HAS FULFILLED THE AFORES AID CONDITION STIPULATED IN SUB-SECTION2 OF SECTION 80IAB OF THE ACT AND IT IS NOT NECESSARY THAT PROFIT SHOULD ARISE ONLY AFTER THE S EZ DEVELOPMENT IS FULLY COMPLETED. IT IS THE CASE OF THE ASSESSEE TH AT THE PROFIT AND GAIN SHOULD ARISE FROM BUSINESS OF DEVELOPING SEZ WHICH IS NOTIFIED BY THE CENTRAL GOVERNMENT AND IT IS THEREFORE CONTENDED ON BEHALF OF THE ASSESSEE THAT ASSESSEE CAN CLAIM DEDUCTION FROM THE YEAR OF ITS ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 34 - BEGINNING OF OPERATION AND THE ASSESSEE IS ENTITLED TO DEDUCTION AT ITS OPTION FROM THE FIRST YEAR OF NOTIFYING OF SEZ. TH E ASSESSEE HAS EXTENSIBLY RELIED UPON THE PROVISIONS OF THE SEZ AC T AND CONTENDED THAT APPROVAL OF THE DEVELOPMENT COMMISSIONER OF SE Z NEED NOT BE TAKEN WHERE THE LAND IS SIMPLY PROPOSED TO BE LEASE D OUT BUT NOT SOLD. IT IS ALSO CONTENDED THAT THE CONSIDERATION RECEIVE D/RECEIVABLE ON FULFILLMENT OF CONDITION OF LEASE AGREEMENT IS INEX TRICABLY RELATED TO THE CARRYING ON OF THE BUSINESS OF DEVELOPMENT OF S EZ FOR THE PURPOSES OF CLAIM OF DEDUCTION UNDER S.80IAB OF THE ACT AND FALLS WITHIN THE EXPRESSION ANY PROFITS AND GAINS DERIVE D BY THE ASSESSEE FROM ANY BUSINESS OF DEVELOPING SEZ. THE ASSESSEE ACCORDINGLY HAS JUSTIFIED ITS ACTION OF CLAIM OF DEDUCTION UNDER S. 80IAB OF THE ACT. THE AO HOWEVER HAS DECLINED TO GRANT THE CLAIM OF D EDUCTION UNDER S.80IAB OF THE ACT. THE CIT(A) ALSO DID NOT FIND M ERIT IN THE CLAIM OF DEDUCTION. 12.3 THE REVENUE HOWEVER IS AGGRIEVED BY THE ENDORS EMENT OF ALTERNATIVE CONTENTION OF THE ASSESSEE RAISED BEFOR E THE CIT(A) THAT THE CONSIDERATION AGREED BETWEEN THE ASSESSEE AND PROPO SED LESSEE (AIPL) FOR INTENDED LEASE OF A PORTION OF LAND BY ASSESSEE IN NOTIFIED SEZ IS NOT AN ACCRUED INCOME AT ALL AND THEREFORE, NOT LIA BLE TO BE TAXED. IN SUPPORT OF ALTERNATIVE GROUND, IT IS THE CASE OF TH E ASSESSEE THAT NO INCOME CAN BE SAID TO HAVE ACCRUED FROM A TENTATIVE AGREEMENT OF EPHEMERAL NATURE IN THE SHAPE OF MOU. IT IS ESSENT IALLY THE CASE OF THE ASSESSEE THAT INCOME WOULD ARISE AND BECOME ABS OLUTE AND CONCEIVABLE AND ABSOLUTE ONLY ON FULFILLMENT OF MAJ OR AND SUBSTANTIVE CONDITIONS ASSOCIATED TO THE AFORESAID AGREEMENT IN CLUDING APPROVAL OF THE PROPOSED LESSEE AS CO-DEVELOPER FROM THE CENTRA L GOVERNMENT WHICH DID NOT SAIL THROUGH. IT IS ESSENTIALLY THE CASE OF THE ASSESSEE THAT THE AGREEMENT WAS EXECUTED FOR SET PURPOSES AN D COULD BE PUT INTO MOTION ONLY ON FULFILLMENT OF THE AFORESAID CONDITI ON AND THEREFORE, ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 35 - THE INCOME TO BE DEDUCED FROM LEASE TRANSACTION WAS HIGHLY CONTINGENT AND NEITHER ACCRUED NOR CRYSTALIZED DURING THE YEAR . IT IS ALSO THE CASE OF THE ASSESSEE THAT ALTHOUGH THE CONSIDERATION AGR EED WITH THE ASSESSEE HAS BEEN WRONGLY RECOGNIZED IN THE BOOKS O F ACCOUNTS AS INCOME FROM SEZ PROJECT, IT HAS NEVER ACTUALLY ACCR UED IN THE HANDS OF THE ASSESSEE AT ALL ON MERE RECEIPT OF AN INSIGNIFI CANT ADVANCE IN THE CONTEXT AND WITHOUT FULFILLMENT OF KEY OBLIGATIONS ASSOCIATED WITH AGREEMENT. ON THESE BROAD FACTS AND HAVING REGARD TO THE TENETS OF MOU, WE FIND THAT CIT(A) HAS CONCLUDED THAT THE MOU /LEASE AGREEMENT CANNOT BE GIVEN EFFECT TO AND NO PART OF RECEIPT CAN BE TREATED AS INCOME OF THE ASSESSEE. THE OVERRIDING CONDITIONS WERE NOT FOUND TO BE FULFILLED AND THEREFORE, THE CIT(A) FOU ND SIGNIFICANT MERITS IN THE ALTERNATIVE CONTENTION OF THE ASSESSE E FOR ITS NON- TAXABILITY ON THE GROUND THAT MERE BOOK KEEPING ENT RY IN A PARTICULAR MANNER CANNOT MAKE ASSESSEE LIABLE TO PAY TAX IN TH E ABSENCE OF WAKE OF DEMONSTRABLE FACTS TOWARDS ACTUAL ACCRUAL OF THE INCOME. THE CIT(A) HAS REFERRED TO SEVERAL JUDICIAL PRONOUNCEME NTS TO BUTTRESS ITS VIEW. THE DELIBERATIONS MADE BY THE CIT(A) IS ALRE ADY REPRODUCED IN THE EARLIER PARA OF THIS ORDER FOR THE SAKE OF CONV ENIENCE. 12.4 TO BEGIN WITH, IT WOULD BE EXPEDIENT TO TAKE A LOOK AT THE FIRST PRINCIPLES FOR TAXABILITY OF INCOME ON THE GROUNDS OF ITS ACCRUAL AND DOCTRINE OF REAL INCOME THEORY. IT IS WELL SETTLED THAT INCOME TAX CANNOT BE LEVIED ON HYPOTHETICAL INCOME UNLESS THE STATUTE PROVIDES OTHERWISE AND ONLY REAL INCOME ACTUALLY ACCRUED TO AN ASSESSEE IS CHARGEABLE TO TAX IN ORDINARY COURSE. THE INCOME A CCRUES WHEN IT BECOMES DUE AND MUST ALSO BE ACCOMPANIED BY A CORRE SPONDING LIABILITY OF THE OTHER PARTY TO PAY THE AMOUNT AND ONLY THEN IT CAN BE SAID FOR THE PURPOSES OF TAXABILITY THAT THE INCOME IS NOT HYPOTHETICAL AND IT HAS REALLY ACCRUED TO THE ASSESSEE. USEFUL REFERENCE IN THIS REGARD CAN BE MADE TO THE DECISION OF THE SUPREME C OURT IN MORVI ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 36 - INDUSTRIES LTD. VS. CIT(CENTRAL) [1971] 82 ITR 835 (SC). AS OBSERVED BY THE HONBLE SUPREME COURT IN SHOORJI VALLABHDAS (SUPRA), IF THE INCOME DOES NOT RESULT AT ALL, THERE CANNOT BE A TA X EVEN THOUGH IN BOOK KEEPING, AN ENTRY WAS MADE ABOUT A HYPOTHETICA L INCOME WHICH DID NOT MATERIALIZE. SIMILAR PROPOSITION HAS BEEN RECOGNIZED IN GODHRA ELECTRICITY CO. LTD. VS. CIT [1997] 225 ITR 746 (SC), WHEREIN IT WAS OBSERVED THAT THE ASSESSEE IS OBLIGED TO PAY TAX ONLY WHEN THE PROFIT BECAME ACTUALLY DUE AND THAT INCOME COULD NO T BE SAID TO HAVE ACCRUED WHEN IT IS BASED ON A MERE CLAIM NOT BACKED BY ANY LEGAL OR CONTRACTUAL RIGHT TO RECEIVE THE AMOUNT AT A SUBSEQ UENT DATE. THE REAL ACCRUAL OF INCOME AND NOT HYPOTHETICAL ACCRUAL OF I NCOME IS REQUIRED TO BE TAKEN INTO CONSIDERATION AS HELD BY THE HONB LE SUPREME COURT IN CIT VS. BIRLA GWALIOR (P) LTD. (1973) 89 ITR 266 (SC). THE HONBLE SUPREME COURT IN STATE BANK OF TRAVENCORE V S. CIT 158 ITR 102 HAS OBSERVED THAT ONE HAS TO LOOK AT THING FROM PRACTICAL POINT OF VIEW. WHAT HAS REALLY ACCRUED TO THE ASSESSEE HAS TO BE FOUND OUT AND WHAT HAS ACCRUED MUST BE CONSIDERED FROM THE POINT OF VIEW OF REAL INCOME TAKING COGNIZANCE OF THE PROBABILITY OR IMPR OBABILITY OF REALIZATION IN A REALISTIC MANNER. IN ESSENCE, INC OME TAX CANNOT BE LEVIED ON HYPOTHETICAL INCOME. THE INCOME ACCRUES WHEN IT BECOMES DUE AND A CORRESPONDING LIABILITY ARISES TO THE OTH ER PARTY IN LAW TO PAY THE AMOUNT. ONLY IN SUCH A SITUATION, CAN IT B E SAID THAT FOR THE PURPOSES OF TAXABILITY THE INCOME IS NOT HYPOTHETIC AL AND IT HAS REALLY ACCRUED TO THE ASSESSEE. 12.5 THE HONBLE CALCUTTA HIGH COURT IN MODERN MALL EABLES LTD. VS. CIT (2011) 11 TAXMANN.COM 131 (CAL.) ONCE AGAIN REI TERATED THE SETTLED PRINCIPLE OF LAW THAT IF A PARTICULAR INCOM E IS NOT TAXABLE UNDER THE ACT, IT CANNOT BE TAXED ON THE BASIS OF ESTOPPE L OR IN OTHER EQUITABLE DOCTRINE. THE HONBLE HIGH COURT FURTHER OBSERVED THAT MERELY BECAUSE AN ASSESSEE HAS MADE WRONG OR EVEN F ICTITIOUS ENTRY IN ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 37 - ACCOUNT, SUCH ACT CANNOT BE A GROUND FOR ACCEPTING SUCH WRONG OR FICTITIOUS ENTRY. THE HONBLE HIGH COURT OBSERVED THAT SINCE NATURE OF ORIGINAL ENTRY IN THE ACCOUNTS, ON THE FACE OF IT, WAS NOT IN CONFORMITY WITH LAW OF ACCOUNTANCY, IT WAS DUTY OF REVENUE TO CALL FOR EXPLANATION FROM ASSESSEE AND TO COME TO A DEFINITE CONCLUSION AS REGARDS REAL NATURE OF TRANSACTION. THE ASSESSING AUTHORITY CANNOT ENFORCE APPARENT WRONG ENTRY AGAINST THE ASSESSEE S IMPLY BECAUSE BY SUCH ALLEGED WRONG ENTRY, ASSESSEE HAD SHOWN HIGHER AMOUNT OF INCOME. IT IS THUS OPEN TO THE ASSESSEE WHO MADE A BOOK ENTRY TO SHOW THAT IT IS INCORRECT. 12.6 HONBLE BOMBAY HIGH COURT IN NIRMALA L. MEHTA VS. AC. BALASUBRAMANIAM (2004) 269 ITR 1 (BOM.) HELD THAT T HERE CANNOT BE ANY ESTOPPEL AGAINST THE STATUTE. ARTICLE 265 OF T HE CONSTITUTION OF INDIA IN UNMISTAKABLE TERMS PROVIDES THAT NO TAX SH ALL BE LEVIED OR COLLECTED EXCEPT BY AUTHORITY OF LAW. ACQUIESCENCE CANNOT TAKE AWAY FROM A PARTY THE RELIEF THAT HE IS ENTITLED TO WHER E THE TAX IS LEVIED OR COLLECTED WITHOUT AUTHORITY OF LAW. 12.7 WHEN THE FIRST PRINCIPLES NOTED ABOVE ARE APPL IED, WE STRAIGHT AWAY CONCUR WITH THE CONCLUSION DRAWN BY THE CIT(A) FOR NON- TAXABILITY OF CONSIDERATION FROM THE IMPUGNED LEASE AGREEMENT IN THE ABSENCE OF ACCRUAL THEREOF AND IN THE ABSENCE OF AN Y LIABILITY OF THE LESSEE TO PAY THE SAME TO THE ASSESSEE AS SUCCESSFU LLY DEMONSTRATED ON BEHALF OF THE ASSESSEE. AN INCOME FROM THE MOU/LEA SE AGREEMENT CANNOT BE SAID TO HAVE ACCRUED OR ARISEN OR BECOME LEGALLY DUE TO ASSESSEE TILL THE TIME THE UNDERLYING INTEGRAL COND ITIONS OF MOU ARE FULFILLED. WE ALSO TAKE NOTE OF THE CRUCIAL FACT T HAT THE ADVANCE RECEIVED FROM THE LESSEE WAS ULTIMATELY RETURNED TO THEM OWING TO CONTINUED NON-FULFILLMENT OF TERMS AND THE CONDITIO NS OF THE PROPOSED LEASE. THIS SUBSEQUENT CONDUCT OF OVERWHELMING SIGN IFICANCE ALSO ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 38 - VINDICATES THE CONTINGENT NATURE IN THE POSSIBILITY OF ACCRUAL OF INCOME. CONTEXTUALLY, IT MAY BE NOTED HERE THAT SE CTION 209 OF THE COMPANIES ACT WAS AMENDED W.E.F. 15.06.1988 MAKING IT OBLIGATORY FOR ALL LIMITED COMPANIES TO MAINTAIN THEIR ACCOUNT S ON ACCRUAL METHOD OF ACCOUNTING. LIKEWISE, SECTION 145 OF THE ACT AL SO RECOGNIZES ONLY ACCRUAL OR CASH METHOD OF ACCOUNTING. THEREFORE, T HE CORPORATE BODY IS REQUIRED TO MAINTAIN ITS ACCOUNT ON ACCRUAL METH OD. AS PER THE ACCRUAL BASIS OF ACCOUNTING, THE INCOME SHOULD BELO NG TO THE PERIOD IN WHICH IT ACCRUES. THEREFORE, THE FACTS AND CIRCUMS TANCES OF THE CASE CLEARLY JUSTIFIED THE ALTERNATIVE CASE OF THE ASSES SEE THAT THE ASSESSEE WAS MERELY A CUSTODIAN OF THE ADVANCES RECEIVED TIL L THE KEY FEATURES OF MOU ARE MET AND CONSEQUENTLY INCOME FROM LEASE A GREEMENT HAD NEVER FACTUALLY ACCRUED OR AROSE IN THE HANDS OF TH E ASSESSEE. NEEDLESS TO SAY, DETERMINATION OF THE INCOME OF AN ASSESSEE IS NOT A MECHANICAL TASK. THE SURROUNDING FACTS AND CIRCUMS TANCES CANNOT BE BRUSHED ASIDE WHILE ENTRUSTED WITH THIS TASK. BOOK ENTRIES MAY, AT TIMES, ARE ONLY SUBSERVIENT TO ACTUAL FACTS. WE TH US DO NOT SEE ANY INFIRMITY IN THE ACTION OF THE CIT(A) FOR NON-CHARG EABILITY OF THE FICTIONAL AND UNACCRUED INCOME IN THE HANDS OF THE ASSESSEE. THE CASE SOUGHT TO BE PROPOUNDED ON BEHALF OF THE REVENUE FO R TAXABILITY OF INCOME FROM PROPOSED LEASE MERELY BASED ON BOOK ENT RIES DE HORS ITS ACCRUAL IN FAVOUR OF ASSESSEE IS NOT SUSTAINABLE IN LAW WHEN TESTED ON THE TOUCHSTONE OF REALISTIC PARAMETERS AND WELL EST ABLISHED JUDICIAL PRINCIPLES. WE THUS DECLINE TO INTERFERE WITH THE A CTION OF THE CIT(A). 12.8 GROUND NO.1 OF THE REVENUES APPEAL IS ACCORDI NGLY DISMISSED. 13. GROUND NO.2 OF THE REVENUES APPEAL CONCERNS DI SALLOWANCE OF DEDUCTION UNDER S.80IB(10) AMOUNTING TO RS.17,15,66 ,503/-. ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 39 - 13.1 THE AO IN THE COURSE OF THE SCRUTINY ASSESSMEN T OBSERVED THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION UNDER S.8 0IB(10) OF THE ACT FOR THE FOLLOWING REASONS: (1) THE ASSESSEE IS NOT THE OWNER OF THE LANDS ON WHICH PROJECTS HAVE BEEN ERECTED. THE SAME IS ESTABLISHED FROM THE FACT THAT THE ASSESSEE COMPANY HAD TO ENTER INTO DEVELOPMENT AGRE EMENT FOR CONSTRUCTION OF THE HOSING PROJECTS. HAD THE ASSESS EE ENJOYED UNOBSTRUCTED RIGHTS IN LAND, THE SAME WOULD NOT HAV E BEEN NECESSARY. (2) THE LAYOUT PLANS OF THE PROJECT HAS BEEN APPROV ED BY THE LOCAL AUTHORITY IN THE NAME OF THE OWNERS OF THE LANDS. (3) AS DISCUSSED IN GREAT DETAIL IN PARA 6.6 TO 6.8 ABOVE, THE ASSESSEE COMPANY CANNOT BE TERMED AS BOTH DEVELOPER AND THE BUILDER OF THE PROJECTS AND NO DEVELOPMENT IS POSSIBLE WITHOUT LAN D. IF THE ASSESSEE FITS INTO BOTH THE ROLES, THEN THE ROLE OF THE OWNER OF THE LAND WOULD NOT COME IN PICTURE. BUT IT IS SEEN ABOV E THAT THE LOCAL AUTHORITY HAS APPROVED THE PLANS IN THE NAME OF THE OWNERS OF LAND AND THE FINAL APPROVAL ( BU CERTIFICATE) WILL ALSO BE ISSUED IN THE NAME OF THE SAME PERSON. (4) WITHOUT PREJUDICE TO ABOVE POINTS, IT IS ALSO S EEN THAT THE BUILT UP AREA OF THE RESIDENTIAL UNITS IS ALSO BEYOND THE PR ESCRIBED LIMIT OF 1500 SQ. FEET. (5) WITHOUT PREJUDICE TO ABOVE REASONS, IT HAS BEEN SEEN IN THE DISCUSSION REGARDING INDIVIDUAL PROJECTS THAT ALONG WITH BUILT UP AREA THE ASSESSEE COMPANY HAS ALSO SOLD OPEN LAND W ITH THE INDEPENDENT RESIDENTIAL UNITS. THE PROFIT DERIVED FROM THE SALE OF THE SAME WOULD NOT QUALIFY FOR THE DEDUCTION U/S. 8 0IB(10). THE AO THUS CLAIMED THAT THE ASSESSEE HAS NOT FULFI LLED THE CONDITIONS STIPULATED FOR CLAIMING DEDUCTION UNDER S.80IB(10) OF THE ACT AND CONSEQUENTLY DISALLOWED THE DEDUCTION CLAIMED AMOUN TING TO RS.17,55,66,503/-. 13.2 AGGRIEVED BY THE DENIAL OF RELIEF BY THE AO, T HE ASSESSEE PREFERRED THE APPEAL BEFORE THE CIT(A). IN THE FIR ST APPEAL, THE CIT(A) ON APPRAISAL OF FACTS AND LAW ENUNCIATED IN THIS REGARD, FOUND MERIT IN THE CLAIM OF ASSESSEE AND THUS ADJUDICATED THE ISSUE IN FAVOUR OF THE ASSESSEE IN FOLLOWING TERMS: ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 40 - 5.3.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION O F THE LD. COUNSEL AS WELL AS THE FINDING OF THE ASSESSING OFFICER RECORD ED IN THE ASSESSMENT ORDER ON THIS ISSUE. I HAVE ALSO CONSIDERED THE MAI N CLAUSES OF THE DEVELOPMENT AGREEMENTS, VARIOUS APPROVALS GRANTED B Y THE MUNICIPAL CORPORATION FOR THE RELEVANT PROJECTS. THE APPELLAN T DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAD FURNISHED ALL THE DETAIL S RELATING TO ALL THE PROJECTS AND SPECIFICALLY CLARIFIED THAT THE APPELL ANT IS FULFILLING ALL THE CONDITIONS PRESCRIBED US/ 8018(10) OF THE ACT. IT W AS ALSO SUBMITTED THAT 'THE DOMINION OVER THE OWNERSHIP OF LAND IS PASSED ON TO THE ASSESSEE COMPANY WITH ALL THE RISK AND LIABILITIES AND ALL T HE PROFITS OR LOSS IN RELATION TO THE LAND IS VESTED IN THE ASSESSEE AND THEREFORE, IN TERMS OF THE DECISION OF THE JURISDICTIONAL TRIBUNAL IN THE CASE OF M/S. RADHE DEVELOPERS IN IT A NO. 2482/AHD./2006 FOR 2003-04 { NOW REPORTED AT 113 TTJ (AHD) 300}, IT IS SUFFICIENTLY ESTABLISHED THAT IN THE CASE OF THE APPELLANT ON ACQUIRING DOMINION OVER THE PROPERTY, THE ASSESSEE HAS DEVELOPED AND CONSTRUCTED THE HOUSING PROJECTS AT I TS OWN COST AND RISKS AND THEREFORE, THE ASSESSEE IS DEEMED TO BE THE OWN ER OF THE PROPERTY ON WHICH THE PROJECT IS DONE.' 5.3.5. THE RELEVANT FINDING OF THE AFORESAID DECISI ON OF M/S. RADHE DEVELOPERS & ORS. VS. I.T.O. & ORS. (SUPRA) IS REPR ODUCED HEREUNDER FOR THE SAME OF CONVENIENCE: 'A BARE READING OF THE PROVISIONS OF S. 80-IB(10) A S THEY STOOD IN THE YEARS UNDER CONSIDERATION, SHOWS THAT THE REQUI REMENTS FOR CLAIMING DEDUCTION FOR HOUSING PROJECTS ARE THAT (I ) THERE MUST BE AN UNDERTAKING FOR DEVELOPING AND BUILDING HOUSING PROJECT; (II) SUCH HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHO RITY' (III) THE DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT HAS COMMENCED ON OR AFTER 1 DAY OF OCTOBER, 1998; (IV) THE HOUSING P ROJECT IS ON -A SIZE OF PLOT OF LAND WHICH HAS A MINIMUM AREA OF ON E ACRE; AND (V) THE RESIDENTIAL UNIT DEVELOPED AND BUILT HAS A BUIL T UP AREA OF 1,000 SQ.FT. IF IT IS SITUATED IN DELHI AND MUMBAI OR WIT HIN 25 KMS. OF MUNICIPAL LIMIT OF THESE CITIES AND 1 ,500 SQ.FT. A T ANY OTHER PLACES. THERE IS NO OTHER CONDITION, WHICH IS TO BE COMPLIE D BY AN ASSESSEE FOR CLAIMING THE DEDUCTION ON PROFITS OF THE HOUSIN G PROJECT. THE CONTENTION OF THE REVENUE AUTHORITIES THAT TO CLAIM DEDUCTION U/S 8016(10), THERE IS CONDITION PRECEDENT THAT THE ASS ESSEE MUST BE OWNER OF THE LAND ON WHICH HOUSING PROJECT IS CONST RUCTED HAS NO FORCE. THERE IS NO SUCH CONDITION AS APPEARING IN T HE PROVISIONS OF THE SECTION. IT MIGHT BE TRUE THAT THE LAND BELONGS TO THE PERSON WHO HAS ENTERED INTO AN AGREEMENT WITH THE ASSESSEE TO DEVELOP AND BUILD HOUSING PROJECT BUT ON A PERUSAL OF THE AGREE MENT IT IS EVIDENT THAT THE DEVELOPMENT AND BUILDING WORK HAS BEEN CARRIED OUT BY THE ASSESSEE IN PURSUANCE TO TRIPARTITE AGRE EMENT AND IT IS NOT BY THE LANDOWNERS. THEREFORE, THE MERE FACT THA T THE LANDOWNER AND THE UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT, ARE TWO DIFFERENT ENTITIES WOULD NOT MAKE ANY DIFFERENC E. THE DEDUCTION WOULD BE ELIGIBLE TO THE PERSON WHO IS DEVELOPING A ND BUILDING HOUSING PROJECT AND NOT TO THE MERE OWNER THEREOF. HAVING ENTERED INTO AGREEMENTS WITH LANDOWNERS FOR DEVELOPMENT AND BUILDING THE HOUSING PROJECT, ASSESSEE WAS OBVIOUSLY A CONTRACTO R BUT IT DOES NOT DEROGATE THE ASSESSEE FOR BEING A DEVELOPER, AS WEL L. THE TERM 'CONTRACTOR1 IS NOT ESSENTIALLY CONTRADICTORY TO TH E TERM 'DEVELOPER'. THE ASSESSEE IS A 'DEVELOPER' AND NOT A 'CONTRACTOR ' AS HELD BY THE ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 41 - LOWER AUTHORITIES. THE DEVELOPER IS NOT WORKING ON REMUNERATION FOR THE LANDOWNERS, BUT DEVELOPER IS WORKING FOR HI MSELF IN ORDER TO EXPLOIT THE POTENTIAL OF ITS BUSINESS IN HIS OWN IN TEREST AND, THEREFORE, OPTED FOR ALL BUSINESS RISKS ASSOCIATED WITH THE BUSINESS OF DEVELOPMENT OF REAL ESTATE INCLUDING DEVELOPING AND BUILDING OF HOUSING PROJECT,' 5.3.6 THE ABOVE PRINCIPLE LAID DOWN IN THE CASE OF RADHE DEVELOPERS (SUPRA) WAS ALSO ENDORSED BY THE HON'BLE AHMEDABAD TRIBUNAL IN THE UNREPORTED CASE OF ITO & ORS. VS. SHAKTI CORPORATIO N & ORS, VIDE ORDER DATED 07-11 -2008 IN ITA NO. 1503/A/2008. THE RELEV ANT FINDING OF THE AFORESAID DECISION OF SHATI CORPORATION & ORS. (SUP RA) IS REPRODUCED HEREUNDER FOR THE SAKE OF CONVENIENCE: 'THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE ARE SIMILAR TO THE FACTS IN THE -CASE OF RADHE DEVELOPERS (SUPRA) AND ACCORDINGLY, WE ARE OF THE VIEW THAT THE ASSESSEE HAS ACQUIRED THE DOMINANCE OVER THE LAND AND HAS DEVELOPED THE HOUSING PROJECT BY I NCURRING ALL EXPENSES AND TAKING ALL THE RISKS INVOLVED THEREIN. WE MAY MENTION HERE THAT, IN OUR OPINION, THE DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA) WILL NOT APPLY IN A CASE WHERE T HE ASSESSEE HAS ENTERED INTO THE AGREEMENT FOR A FIXED REMUNERATION MERELY AS A CONTRACTOR TO CONSTRUCT OR DEVELOP THE HOUSING PROJ ECT ON BEHALF OF THE LANDOWNER. THE AGREEMENT ENTERED INTO IN THAT C ASE WILL NOT ENTITLE THE DEVELOPER TO HAVE THE DOMINANT CONTROL OVER THE PROJECT AND ALL THE RISKS INVOLVED THEREIN WILL VEST WITH T HE LANDOWNER ONLY. THE INTEREST OF THE DEVELOPER WILL BE RESTRICTED ON LY FOR THE FIXED REMUNERATION FOR WHICH HE WOULD BE RENDERING THE SE RVICES. THE DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA) HA S NOT DEALT WITH SUCH ' SITUATION. THE PROPOSITION OF LAW LAID DOWN IN THE CASE OF RADHE DEVELOPERS CANNOT BE APPLIED UNIVERSALLY WITH OUT LOOKING INTO THE DEVELOPMENT AGREEMENT ENTERED INTO BY THE DEVELOPER WITH THE LANDOWNER. IN THE CASE OF SHAKTI CORPORATION SI NCE THE ASSESSEE HAS FILED COPY OF THE DEVELOPMENT AGREEMENT AND DEV ELOPED THE HOUSING PROJECT AT ITS OWN, THEREFORE, WE ARE OF TH E VIEW THAT THE ASSESSEE WILL BE ENTITLED FOR THE DEDUCTION U/S 80I B(10). THE DECISION OF THE HON'BLE SUPREME COURT IN FAKIR CHAN D GULATI (CIVIL APPEAL NO. 3302 OF 2005) WILL NOT ASSIST THE REVENU E, AS THE AGREEMENT IS NOT SHARING OF CONSTRUCTED AREA.' 5.3.7. I HAVE CAREFULLY GONE THROUGH THE RELEVANT C LAUSES OF THE DEVELOPMENT AGREEMENTS AND OTHER DOCUMENTS FILED BE FORE THE ASSESSING OFFICER AS WELL AS BEFORE ME. ON CONSIDERATION OF T HE RELEVANT DOCUMENTS, I CAME TO THE CONCLUSION THAT THE APPELLANT HAD ACQ UIRED THE DOMINANCE OVER THE LAND AND THE LAND IS UNDER THE POSSESSION OF THE APPELLANT COMPANY. THE APPELLANT COMPANY WAS THE DE-FACTO LAN DOWNER FOR ALL PRACTICAL PURPOSES AND HAD DEVELOPED THE HOUSING PR OJECT BY INCURRING ALL THE EXPENSES AND TAKING ALL THE RISKS INVOLVED THER EIN. THE LAND OWNERS WERE ELIGIBLE TO GET ONLY PRICE OF LAND FIXED BY TH E DEVELOPMENT AGREEMENTS AND NOT TO GET ANY SHARE IN THE DEVELOPM ENT PROFITS OF THE PROJECT. 5.3.8. THE LD. A.R ALSO FILED BEFORE ME THE COPY OF PLANS, VARIOUS SANCTIONS AND CERTIFICATE OF GOVT. APPROVED ENGINEE R ALONGWITH DETAIL OF ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 42 - EACH UNIT OF THE SCHEME. THE CERTIFICATE CLEARLY IN DICATES THAT BUILD UP AREA OF EACH UNIT IS BELOW 1500 SQ.FT. 5.3.9 LOOKING TO THE ABOVE REFERRED SUBMISSIONS OF LD AR, FACTS OF THE CASE, FINDINGS OF THE DCIT AND VARIOUS LEGAL CITATI ONS SUBMITTED ALONG WITH THE FACTS OF EARLIER YEARS ASSESSMENT IN WHICH THE DEDUCTION U/S 80IB(10) HAS BEEN ALLOWED BY THE DEPARTMENT ON THE SAME PROJECTS WHICH ARE SIMILAR TO THIS YEAR, I DIRECT THE AO TO ALLOW THE CLAIM OF THE APPELLANT COMPANY U/S 80IB(10) OF RS.17,15,66,503/- . 13.3 THE REVENUE HAS KNOCKED THE DOOR OF THE TRIBUN AL AGAINST THE RELIEF GRANTED BY THE CIT(A) TOWARDS DEDUCTION CLAI MED UNDER S.80IB(10) OF THE ACT. 13.4 WHEN THE MATTER WAS CALLED FOR HEARING, THE LE ARNED DR FOR THE REVENUE RELIED UPON THE ORDER OF THE AO. 13.5 THE LEARNED AR FOR THE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT THE DEVELOPMENT AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND LAND OWNERS FOR ACQUIRING THE RIGHTS AND OWNERSHIP OF THE LAND FROM VARIOUS LAND OWNERS AND THE COPY OF THE LEDGER ACCO UNT SHOWING CONSIDERATION PAID FOR ACQUIRING THE RIGHTS IN THE LAND AND ALSO COPIES OF INCOME TAX RETURN OF THE TRANSFERORS WOULD SHOW THAT THE TRANSFEROR COMPANIES HAVE OFFERED TAXES (LTCG) IN THEIR RESPEC TIVE RETURNS RECOGNIZING THE TRANSFER OF LAND IN FAVOUR OF THE A SSESSEE. IT WAS CONTENDED THAT THE ASSESSEE HAS THE INTRINSIC RIGHT AND OWNERSHIP IN THE LAND AS PER THE DEVELOPMENT AGREEMENT ENTERED INTO WITH THE LAND OWNER COMPANIES FOR WHICH THE CONSIDERATION HAS BEE N DULY PAID TO THE LAND OWNERS. THUS, THE ASSESSEE HAS ACQUIRED DOMIN ANT CONTROL OVER THE LAND ON WHICH CONSTRUCTION AND DEVELOPMENT OF T HE RESIDENTIAL HOUSING PROJECT WAS CARRIED OUT. THE ASSESSEE INCU RRED ALL THE EXPENSES OF THE DEVELOPMENT, CONSTRUCTION AND ADMIN ISTRATIVE EXPENSES AND TOOK ALL RISKS AND LIABILITIES. AS A SEQUEL THERETO, ALL THE PROFITS OR LOSS IN RELATION TO THE DEVELOPMENT OF T HE RESIDENTIAL HOUSE PROJECT STOOD VESTED IN THE ASSESSEE. THE LEARNED AR CONTENDED THAT ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 43 - ALL THE TERMS AND CONDITIONS LAID DOWN IN SECTION 8 0IB (10) OF THE ACT WERE FULFILLED AND IS SUPPORTED BY RELEVANT EVIDENC ES AS PLACED BEFORE THE LOWER AUTHORITIES. THE LEARNED AR NEXT SUBMITT ED THAT THE RATIO OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN C IT VS. RADHEY DEVELOPERS & ORS. (2012) 341 ITR 403 (GUJ) SQUARELY COVERS THE CASE OF THE ASSESSEE. THE LEARNED AR ALSO RELIED UPON T HE DECISION OF THE HONBLE GUJARAT HIGH COURT IN CASE OF CIT VS. VISHA L DEVELOPER (2014) 52 TAXMANN.COM 514 AND CIT VS. SWASTIK ASSOC IATES 46 TAXMANN.COM 53 FOR ELIGIBILITY OF DEDUCTION UNDER S .80IB(10) OF THE ACT. 13.6 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS ON THE ISSUE CONCERNING DEDUCTION UNDER S.80IB(10) OF THE ACT. ON APPRAISAL OF THE DEVELOPMENT AGREEMENTS, VARIOUS APPROVALS GRANTED B Y THE MUNICIPAL CORPORATION FOR THE RELEVANT PROJECTS, THE CIT(A) C AME TO A JUSTIFIABLE CONCLUSION THAT THE ASSESSEE HAS EXERCISED DOMINANT CONTROL OVER THE OWNERSHIP OF THE LAND AND HAS CARRIED OUT CONSTRUCT ION AND DEVELOPMENT AT ITS OWN RISKS AND LIABILITIES. THE CIT(A) HAS TAKEN INTO ACCOUNT THE DETAILED SUBMISSIONS MADE ON BEHAL F OF THE ASSESSEE WHILE ADJUDICATING THE ISSUE IN FAVOUR OF THE ASSES SEE APPLYING THE JUDICIAL INTERPRETATIONS AVAILABLE IN THIS REGARD. THE OBJECTION TOWARDS EXCESSIVE BUILT UP AREA HAS ALSO BEEN ADDRESSED BY THE CIT(A) BASED ON DOCUMENTARY EVIDENCES. DOCUMENTARY EVIDENCES RE VEALED THAT BUILT UP AREA WAS WITHIN THE PERMISSIBLE LIMIT. THE REVE NUE BEFORE US COULD NOT POINT OUT ANY DEFICIENCY IN THE ORDER OF THE CIT(A). WE ALSO TAKE NOTE OF THE SIGNIFICANT PLEA ON BEHALF OF THE ASSESSEE THAT THE CLAIM OF DEDUCTION UNDER S.80IB(10) OF THE ACT WAS DULY ALLOWED BY THE AO IN SUBSEQUENT YEAR 2010-11 AND 2011-12 IN TH E ASSESSMENT FRAMED UNDER S.143(3) OF THE ACT. ALSO, IN THE ABS ENCE OF REBUTTAL OF OBSERVATIONS MADE BY THE CIT(A), WE DO NOT SEE ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CIT(A). WE THUS EX PRESS OUR ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 44 - CONCURRENCE WITH THE CONCLUSION DRAWN BY THE CIT(A) AND HENCE DECLINE TO INTERFERE. 14. IN THE RESULT, GROUND NO.2 OF THE REVENUES APP EAL IS DISMISSED. 15. GROUND NO.3 OF THE REVENUES APPEAL CONCERNS DI SALLOWANCE UNDER S.36(1)(III) OF THE ACT ON ACCOUNT OF PROPORT IONATE INTEREST EXPENDITURE OF RS.1,31,00,000/-. 15.1 IN THE COURSE OF THE ASSESSMENT, THE AO INTER ALIA OBSERVED THAT THE ASSESSEE COMPANY HAS ADVANCED AN AMOUNT OF RS.2 ,59,00,22,720/- TO RELATED COMPANIES UNDER THE SAME MANAGEMENT AND CONSEQUENTLY, WORKED OUT DISALLOWANCE OF PROPORTIONATE INTEREST E XPENDITURE OF RS.1.31 CRORES IN THE RATIO OF BORROWED FUNDS (RS.8 1.24 CRORE) VIS-- VIS TOTAL OWN FUNDS OF (RS.385.17 CRORES). 15.2 AGGRIEVED BY THE DISALLOWANCE OF PROPORTIONATE INTEREST EXPENDITURE, THE ASSESSEE PREFERRED THE APPEAL BEFO RE THE CIT(A). IT WAS CONTENDED BEFORE THE CIT(A) THAT WHILE THE ASSE SSEE HAS INCURRED INTEREST EXPENDITURE OF RS.6.21CRORES, THE ASSESSEE HAS ALSO SIMULTANEOUSLY EARNED INTEREST INCOME OF RS.12.62CR ORES AND RESULTANTLY, THERE IS A NET INTEREST INCOME OF RS.6 .41 CRORES IN THE HANDS OF THE ASSESSEE COMPANY. THIS FACT WAS OVERL OOKED BY THE AO. IT WAS FURTHER CONTENDED THAT THE ASSESSEE COMPANY HOLDS OWN CAPITAL BY WAY OF SHARE CAPITAL AND FREE RESERVES TO THE TU NE OF RS.417.83 CRORES WHEREAS THE CORRESPONDING ADVANCE OF RS.259 CRORES WERE GIVEN INTEREST FREE. IT WAS CONTENDED THAT ADVANCE S HAVE BEEN MADE FOR BUSINESS PURPOSES AS POINTED OUT TO AO. IT WAS FURTHER CONTENDED THAT IN VIEW OF THE OWN FUNDS (INTEREST FREE) AT TH E DISPOSAL OF THE ASSESSEE IN EXCESS OF THE ADVANCE MADE, THE ISSUE I S COVERED BY THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN CIT VS . RELIANCE ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 45 - UTILITIES AND POWER LTD. (2009) 313 ITR 340(BOM HC) . THE ASSESSEE ALSO BROUGHT OUT TO THE NOTICE OF THE CIT(A) THAT I N THE EARLIER ASSESSMENT YEARS CONCERNING AYS. 2004-05, 2005-06 & 2006-07, THE ASSESSMENT WAS COMPLETED WITHOUT ANY SUCH DISALLOWA NCE IN THE REALM OF SIMILAR FACTS. 15.3 THE CIT(A) RE-VISITED THE FACTS POINTED OUT ON BEHALF OF THE ASSESSEE AS NOTED ABOVE AND AGREED WITH THE PLEA OF THE ASSESSEE FOR ALLOWABILITY OF INTEREST EXPENDITURE AS CLAIMED. T HE RELEVANT OPERATIVE PART OF THE ORDER OF THE CIT(A) IN THIS R EGARD IS REPRODUCED HEREUNDER: 6.3 I HAVE GONE THROUGH THE FACTS OF THE CASE, FIN DING OF THE DCIT AND ALSO SUBMISSION MADE ALONG WITH VARIOUS JUDICIAL PR ONOUNCEMENTS. IT IS ALSO OBSERVED THAT THE APPELLANT HAS SHARE CAPITAL OF RS.32.65 CRORES AND RESERVES AND SURPLUS TO THE TUNE OF RS,385.17 CRORE S AS AGAINST BUSINESS ADVANCES OF RS.259,00 CRORES AGGREGATING TO RS. 417 .82 CRORES. IT IS ALSO FURTHER OBSERVED THAT RS. 66.28 CRORES HAVE BEEN OU TSTANDING ON 01/04/2007 IN GANESH PLANTATIONS LTD. AND RS. 11.79 CRORES HAVE BEEN ADVANCED TO 100% SUBSIDIARY COMPANY. IT IS FURTHER SUBMITTED THAT ADVANCES ARE GIVEN TO A SUBSIDIARY COMPANY AND OTHE R COMPANIES SO THAT THE AGRICULTURAL LAND CAN BE BOUGHT BY THEM AND AFT ER CONVERTING THE SAME TO N.A., THE SAME CAN BE SOLD/TRANSFERRED TO THE AP PELLANT COMPANY. THIS PRACTICE IS DONE FOR THE BASIC FACT THAT THE APPELL ANT COMPANY CANNOT BUY AGRICULTURAL LAND IN ITS OWN NAME. FURTHER, THE RELIANCE WAS PLACED ON THE JUDGEMENT O F CIT V/S RELIANCE UTILITIES AND POWER LTD. 313 ITR 340 (BOMBAY) , TORRENT FINANCIERS (73 TTJ 624 (AHMEDABAD) WHEREIN IT WAS HELD THAT 'TRIBU NAL HAVING RECORDED A CLEAR FINDING THAT THE ASSESSEE POSSESSED SUFFICI ENT INTEREST FREE FUNDS OF ITS OWN WHICH WERE GENERATED IN THE COURSE OF ME RE LEVANT FINANCIAL YEAR, APART FROM SUBSTANTIAL SHAREHOLDERS' FUNDS, PRESUMP TION STANDS ESTABLISHED THAT THE INVESTMENTS IN SISTER CONCERNS WERE MADE BY THE ASSESSEE OUT OF INTEREST FREE FUNDS AND THEREFORE, NO PART OF INTEREST ON BORROWINGS CAN BE DISALLOWED ON THE BASIS THAT THE INVESTMENTS WERE MADE OUT OF INTEREST BEARING FUNDS. IT WAS FURTHER SUBMI TTED THAT MAJOR BORROWINGS HAVE BEEN TAKEN FROM BANKS AND FINANCIAL INSTITUTIONS WHICH MONITOR THE APPLICATION OF THE BORROWED FUNDS ALSO AND THEREFORE ALSO BORROWED FUNDS COULD NOT BEEN USED FOR ANY OTHER PU RPOSE. IN VIEW OF ABOVE REFERRED FACTS AND LEGAL POSITION OF THE LAW, I DIRECT THE AO TO DELETE THE DISALLOWANCE MADE OF INTEREST AMOUNTING TO RS, 1,31,00,000/-, 15.4 AGGRIEVED BY THE RELIEF GRANTED BY THE CIT(A), THE REVENUE PREFERRED APPEAL BEFORE THE TRIBUNAL. ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 46 - 15.5 THE LEARNED DR FOR THE REVENUE RELIED UPON THE ORDER OF THE AO. 15.6 THE LEARNED AR FOR THE ASSESSEE, ON THE OTHER HAND, REITERATED VARIOUS SUBMISSIONS MADE BEFORE THE CIT(A) AND SUBM ITTED THAT LAW IS WELL SETTLED IN THIS REGARD. IT WAS FURTHER POINTE D OUT THAT FOR THE AY 2014-15 WHERE THE ASSESSEE IS PLACED IN THE SIMILAR CIRCUMSTANCES, NO DISALLOWANCE HAS BEEN MADE BY THE AO HIMSELF OF COR RECT APPRECIATION OF FACT. THE LEARNED AR FOR THE ASSESSEE ACCORDING LY SUBMITTED THAT THERE IS NO WARRANT FOR ANY INTERFERENCE WITH THE O RDER OF THE CIT(A). 15.7 WE HAVE HEARD RIVAL SUBMISSIONS. THE MAINTAINA BILITY OF DISALLOWANCE OF INTEREST EXPENDITURE UNDER S.36(1)( III) OF THE ACT IS IN QUESTION. AS NOTED BY THE CIT(A), THE ASSESSEE HAS CLEARLY DEMONSTRATED ITS OWN FUNDS TO BE IN EXCESS OF CORRE SPONDING INTEREST FREE ADVANCES. SECONDLY, THE ASSESSEE HAS EARNED S UBSTANTIAL INTEREST NETTING OF WHICH HAS NOT BEEN GIVEN BY THE AO AT AL L. THE CIT(A) FURTHER NOTED THAT THE AO HAS ADOPTED INCONSISTENT STAND AND DISALLOWED THE INTEREST EXPENDITURE ON PROPORTIONAT E BASIS IN THIS YEAR WHEREAS ACCEPTED THE INTEREST CLAIM IN THE EARLIER YEARS. BEFORE US, THE REVENUE COULD NOT SUPPORT THE CASE OF THE AO FOR DI SALLOWANCE. THE ISSUE IN THE CONTEXT OF THE FACTS IS NO LONGER RES INTEGRA AND COVERED IN FAVOUR OF THE ASSESSEE BY SEVERAL JUDICIAL PRECEDEN TS AS RIGHTLY RECORDED BY THE CIT(A). IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE CIT(A) HAS APPROACHED THE ISSUE IN PROPER PERSPECTIVE AND REVERSED THE WRONGFUL DISALLOWANCE MADE BY THE AO. WE THUS SEE NO PERCEPTIBLE REASON TO INTERFERE WITH THE ORDER OF T HE CIT(A). 15.8 GROUND NO.3 OF THE REVENUES APPEAL IS DISMISS ED. 15.9 IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO . 2122/AHD/2011 FOR AY 2008-09 IS DISMISSED. ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 47 - ITA NO. 2179/AHD/2011 A.Y. 2008-09 (ASSESSEES APPE AL) 16. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE R EADS AS UNDER:- I. TAXING THE ADVANCE RECEIPT BEING CONTINGENT IN NATURE UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT RS. 97 ,72,11,000/- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS WH ILE HOLDING THAT THE APPELLANT COMPANY IS LIABLE TO TAX ON ADVANCE RECEIPT WHICH I S CONTINGENT IN NATURE AS BOOK PROFIT U/S.115JB OF THE ACT. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS WH ILE GIVING CONTRADICTORY FINDINGS IN RESPECT OF AMOUNT RECEIVED FROM ABIR INVESTMENTS PVT. LTD., WHILE TREATING THE SAID AMOUNT AS ADVANCE RECEIPT BEING CONTINGENT IN NATUR E ON ACCOUNT NON-FULFILLMENT OF PRESCRIBED CONDITIONS OF THE LEASE AGREEMENT VIS-- VIS RULES AND REGULATIONS OF SEZ ON ONE HAND AND HOLDING THAT THE APPELLANT COMPANY IS LIAB LE TO TAX ON SUCH RECEIPT AS BOOK PROFIT U/S.115JB OF THE ACT ON THE OTHER HAND. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN GIVING THE DIRECTION TO THE A.O. TO RE-COMPUTE THE BOOK PROFIT U/S.115JB OF THE ACT. 16.1 THE ASSESSEES APPEAL AS PER GROUNDS NOTED ABO VE SEEKS TO CHALLENGE THE TAXABILITY OF ADVANCE RECEIPTS IN PUR SUANCE OF MOU /LEASE AGREEMENT WRONGLY RECOGNIZED IN THE BOOKS OF ACCOUNTS AS INCOME FROM SEZ PROJECT FOR THE PURPOSES OF DETER MINATION OF BOOK PROFIT UNDER S.115JB OF THE ACT. IT IS THE CASE OF THE ASSESSEE THAT AS DEMONSTRATED IN THE REVENUES APPEAL IN ITA NO. 212 2/AHD/2011 (SUPRA), THE AGREED CONSIDERATION RECOGNIZED ON THE BASIS OF MOU HAS NEITHER ACCRUED NOR RECEIVED AND THE INCOME FROM SU CH MOU IS COMPLETELY CONTINGENT AND CONDITIONED UPON FULFILLM ENT OF VARIOUS OBLIGATIONS INTEGRAL TO THE PROPOSED AGREEMENT INCL UDING APPROVAL OF THE GOVERNMENT FOR PUTTING THE PROPOSED AGREEMENT I NTO MOTION. IN ESSENCE, IT IS FURTHER CONTENDED THAT ASSESSEE HAS RECEIVED ONLY A TOKEN AMOUNT OF RS.1 CRORE DURING THE YEAR AND REMAINING ADVANCE RECEIVED IN SUBSEQUENT YEARS WERE ULTIMATELY RETURNED DUE TO LACK OF APPROVAL OF THE LESSEE AS A CO-DEVELOPER IN SEZ PROJECT FROM THE CENTRAL GOVERNMENT. IT IS CONTENDED ON BEHALF OF THE ASSESS EE THAT WHEN THE CIT(A) HAS OBSERVED ON FACTS THAT THE CONSIDERATION AGREED UPON AS PER THE LEASE AGREEMENT IS HIGHLY CONTINGENT AND LI ABLE TO BE RETURNED ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 48 - ON NON-FULFILLMENT OF PRESCRIBED CONDITIONS, THERE WAS NO WARRANT FOR THE CIT(A) TO RECKON THE SAME CONSIDERATION (RECOGN IZED IN THE BOOKS OWING TO SUCH AGREEMENT) FOR THE PURPOSES OF DETERM INATION OF BOOK PROFIT. AS NOTICED EARLIER, IT IS ALSO THE CONTENT ION OF THE ASSESSEE THAT THERE IS NO SALE OF LAND TO AIPL PER SE AND THE RIGHT, TITLE AND INTEREST HAS NOT BEEN RELINQUISHED IN FAVOUR OF THE PROPOSED LESSEE AT ALL. THE ASSESSEE HAS NEITHER RECEIVED THE CONSIDERATION NOR THE POSSESSION OF THE LAND HAS BEEN GIVEN. THE LEASE DEED IS NOT REG ISTERED IN THE LAND REVENUE RECORDS. THEREFORE, SOME HYPOTHETICAL INCO ME RECORDED IN THE BOOKS OF ACCOUNTS WITH CORRESPONDING LIABILITY OF T HE LESSEE TO PAY THE AFORESAID AMOUNT TO THE ASSESSEE SUBJECT TO FULFILL MENT OF PIVOTAL CONDITIONS AND OBLIGATIONS WOULD NOT PARTAKE CHARAC TER OF INCOME/PROFITS EVEN BY APPLYING RUDIMENTARY PRINCIP LES OF ACCOUNTANCY. ON FACTS, THE ASSESSEE HAS DEMONSTRAT ED THAT THE INCOME RECORDED IN THE BOOKS WAS ILLUSORY AND WAS ULTIMATE LY REFUNDED TO THE PROPOSED LESSEE IN THE SUBSEQUENT YEAR 2014-15 AS T HE APPROVAL OF THE CENTRAL GOVERNMENT COULD NOT BE APPROVED. IT IS FU RTHER CASE OF THE ASSESSEE THAT WHERE SUCH PROPOSED INCOME FROM PROPO SED LEASE IS OUTSIDE THE SWEEP OF INCOME IN SECTION 2(24) OF T HE ACT AND DOES NOT ENTER INTO COMPUTATION UNDER NORMAL PROVISIONS OF T HE ACT, THE SAME CANNOT BE SUBJECTED TO TAX UNDER THE SAID PROVISION S OF SECTION 115JB OF THE ACT IN VIEW OF SAVING CLAUSE PROVIDED IN SUB -SECTION 5 THEREOF. A REFERENCE WAS TO THE DECISION OF THE HONBLE SUPR EME COURT IN INDO RAMA SYNTHETICS (I) LTD. VS. CIT (2011) 330 ITR 363 (SC) TO SUBMIT THAT THE OBJECT OF MAT PROVISION IS TO BRING OUT TH E TRUE WORKING RESULT OF THE COMPANIES. IT WAS CONTENDED THAT WHE RE THE INCOME NOT ACCRUED OR ARISING TO THE COMPANY AT ALL, THE INCLU SION THEREOF IN THE P&L ACCOUNT WOULD NOT BE IN ACCORDANCE WITH PART II & III OF SCHEDULE VI OF THE COMPANIES ACT. FURTHER A REFERE NCE WAS MADE TO ANOTHER DECISION OF THE HONBLE SUPREME COURT IN TH E CASE OF PADMARAJE R. KADAMBANDE VS. CIT (1992) 195 ITR 877 (SC) WHEREIN ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 49 - IT HAS BEEN HELD BY THE APEX COURT THAT THE CAPITAL RECEIPTS ARE NOT INCOME WITHIN THE DEFINITION OF SECTION 2(24) OF TH E ACT AND HENCE ARE NOT AT ALL CHARGEABLE UNDER THE IT ACT. A RECEIPT WHICH IS NEITHER PROFIT NOR INCOME AND WHICH DOES NOT HAVE ANY ELEME NT OF INCOME EMBEDDED THEREIN, CANNOT BE PART OF PROFIT AS PER P &L ACCOUNT PREPARED IN TERMS OF PART II OF SCHEDULE VI TO THE COMPANIES ACT. IT WAS NEXT POINTED OUT THAT THE GENESIS OF SECTION 11 5J, THEREAFTER SECTION 115JA AND NOW SECTION 115JB OF THE ACT WAS TO ENSURE THAT THE ASSESSEE BY MAKING PROFIT FROM OPERATIONS SHOUL D NOT ENJOY TAX FREE STATUS DUE TO MANY DEDUCTIONS AVAILABLE UNDER THE INCOME TAX ACT. IT WAS CONTENDED THAT THERE WAS NEVER ANY INT ENTION OF THE LEGISLATURE TO TAX WHAT IS NOT INCOME AT ALL. IT W AS SUBMITTED THAT INCLUSION OF SUCH A REFUNDABLE ADVANCE RECEIPTS OF INTRINSICALLY CONTINGENT NATURE (WHICH IS PARALLELY A LIABILITY O F THE COMPANY) IN THE COMPUTATION OF MAT WOULD DEFEAT BOTH THE FUNDAMENTA L PRINCIPLES NAMELY (I) IT WOULD TANTAMOUNT TO LEVY TO TAX ON RE CEIPT WHICH IS NOT IN THE NATURE OF INCOME AND (II) IT WOULD GIVE RISE TO MISLEADING WORKING RESULTS OF THE COMPANY INSTEAD OF REAL WORK ING RESULT. IT WAS SUBMITTED THAT IN ORDER TO ARRIVE AT THE CORRECT WO RKING RESULT, THE CONSIDERATION AGREED BY WAY OF MOU AND RECOGNIZED I N THE BOOKS DESPITE ITS HIGHLY CONTINGENT AND DEPENDENT ON VARI OUS UNFORESEEN AND UNCONTROLLABLE FACTORS REQUIRES TO BE EXCLUDED UNLE SS THE RIGHT TO RECEIVE THE CONSIDERATION ACCRUES AND CRYSTALIZES I N FAVOUR OF THE ASSESSEE. IT WAS FURTHER CONTENDED THAT THE PRINCI PLES LAID DOWN BY THE HONBLE SUPREME COURT IN A CASE OF APOLLO TYRES LTD . VS. CIT (2002) 255 ITR 273 (SC) IS LIMITED TO THE ASPECT WH ETHER THE AO IS ENTITLED TO RECAST AUDITED ACCOUNTS PREPARED IN ACC ORDANCE WITH PART II & PART III OF THE SCHEDULE VI OF THE COMPANIES ACT. IT WAS THUS SUBMITTED THAT WHERE THE P&L ACCOUNT IS NOT PREPARE D IN ACCORDANCE WITH PART II & III OF SCHEDULE VI OF THE COMPANIES ACT AT THE FIRST PLACE, THE SAID DECISION CANNOT BE APPLIED AND DOES NOT PROHIBIT ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 50 - NEEDFUL ADJUSTMENT TO BRING IT IN TUNE WITH SCHEDUL E VI TO THE COMPANIES ACT. THE LEARNED AR FOR THE ASSESSEE REF ERRED TO THE SPECIAL BENCH IN CASE OF RAIN COMMODITIES LTD. VS. DCIT 41 DTR 449 (HYDERABAD) (SB) TO SUPPORT THE AFORESAID POSITION OF LAW. IT WAS SUBMITTED THAT THE SPECIAL BENCH HAS ALSO HELD THAT IF THE P&L ACCOUNT IS NOT IN ACCORDANCE WITH PART II & PART III OF SCH EDULE VI TO THE COMPANIES ACT, IT WOULD BE PERMISSIBLE TO ALTER THE NET PROFIT SO AS TO MAKE IT COMPLIANT WITH THE SAME WHICH IS THE STARTI NG POINT FOR COMPUTATION OF BOOK PROFIT IN TERMS OF SECTION 115J B OF THE ACT. IN THE SAID JUDGMENT, INCLUSION OF SALES TAX SUBSIDY I N P&L ACCOUNT WAS NOT FOUND TO BE IN ACCORDANCE WITH SCHEDULE VI PA T II & III. IT WAS HELD THAT NEEDFUL ADJUSTMENT TO EXCLUDE THE SAME IS NOT ONLY PERMISSIBLE BUT IS MANDATORY SO AS TO MAKING P&L AC COUNT SYNC WITH THE BASIC REQUIREMENT OF SECTION 115JB OF THE ACT. THE RELIANCE WAS PLACED ON YET ANOTHER DECISION OF THE CO-ORDINATE B ENCH OF THE TRIBUNAL IN DCIT VS. BOMBAY DIAMOND COMPANY LTD. (2 010) 33 DTR 59 (MUMBAI) AND THAT OF BANGALORE TRIBUNAL IN THE C ASE OF SYNDICATE BANK VS. ACIT (2006) 7 SOT 51 (BANG.) WHERE THE ADJ USTMENTS WERE PERMITTED TO THE P&L ACCOUNT DRAWN BY THE ASSESSEE SO AS TO COMPLY WITH SCHEDULE VI PART II & PART III OF THE COMPANIE S ACT, WHICH IS PRE-REQUISITE FOR SECTION 115JB OF THE ACT. THE LE ARNED AR THEREAFTER SUBMITTED THAT THERE ARE LARGE NUMBER OF JUDICIAL P RONOUNCEMENTS TO THE EFFECT THAT TAX LIABILITY UNDER S.115JB OF THE ACT CANNOT BE APPLIED WHERE IT HAS BEEN DEMONSTRATED ON FACTS THAT THE CO NSIDERATION ARISING FROM THE LEASE AGREEMENT IS HIGHLY CONTINGENT AND H YPOTHETICAL INCOME WITH CORRESPONDING LIABILITY OF THE COMPANY STOOD C REATED NOTWITHSTANDING ERRONEOUS ENTRIES MADE IN THE BOOKS OF ACCOUNTS IN THIS REGARD. IT WAS SUBMITTED IN CONCLUSION THAT W HAT IS NOT CHARGEABLE TO TAX AT ALL UNDER CHARGING SECTION 4 & 5 OF THE A CT CANNOT BE CHARGED TO TAX UNDER DEEMING PROVISIONS OF S.115JB OF THE A CT. THE RECEIPT/RECEIVABLE ON ACCOUNT OF LEASE AGREEMENT IN THIS YEAR IS ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 51 - RETURNABLE IN SUBSEQUENT YEAR AND THUS DOES NOT BEA R THE CHARACTER OF INCOME IN THE ABSENCE OF LEGAL RIGHT TO RECEIVE SUC H MONEY CREATED IN FAVOUR OF THE ASSESSEE AND THUS CANNOT FORM PART OF THE BOOK PROFIT FOR THE PURPOSES OF SECTION 115JB OF THE ACT. 16.2 LEARNED DR, ON THE OTHER HAND, SUBMITTED THAT THE ASSESSEE ITSELF HAS RECOGNIZED THE CONSIDERATION FROM LEASE AGREEME NT AS THE REVENUE INCOME AND THEREFORE, THERE IS NO REASON FOR THE AO TO TRAVEL BEYOND WHAT HAS BEEN ACCEPTED BY THE ASSESSEE ITSELF AND T HEREFORE, NO ADJUSTMENT FOR DETERMINATION OF BOOK PROFIT IS REQU IRED. 16.3 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND THE FACTS OF THE CASE AND PERUSED THE ORDER OF THE LOWER AUTH ORITIES. THE PERTINENT QUESTION INVOLVED IS WHETHER THE CONSIDER ATION ARISING FROM THE MOU/LEASE DEED WITH AIPL RECOGNIZED AS REVENUE INCOME DESPITE IT BEING A CONTINGENT LIABILITY AND ADMITTEDLY NOT ACCRUED OR EARNED BY THE ASSESSEE IS LIABLE FOR TAXATION UNDER S.115JB O F THE ACT OR NOT. 16.4 IT MAY BE PERTINENT HERE TO RE-CAPITULATE THAT SECTION 115JB OF THE ACT REQUIRES THAT THE ACCOUNT OF THE COMPANY SH OULD BE PREPARED IN COMPLIANCE WITH SCHEDULE VI OF COMPANIES ACT AND FO LLOWING THE SAME ACCOUNTING POLICIES, ACCOUNTING STANDARDS AND DEPRECIATION POLICY AS IN THE ACCOUNTS PREPARED IN THE COMPANIES ACT. THEREFORE, WHILE DETERMINING THE BOOK PROFIT FOR THE PURPOSES OF SECTION 115JB OF THE ACT ACCOUNTS ARE TO BE DRAWN IN ACCORDANCE WITH PART II & III OF SCHEDULE VI OF COMPANIES ACT. THIS WILL INCLUDE CO MPLIANCE WITH ACCOUNTING STANDARDS. THE PIVOTAL ARGUMENT OF THE ASSESSEE IS THAT THE LEASE CONSIDERATION RECOGNIZED IN THE P&L ACCOUNT B EING HIGHLY CONTINGENT AND ILLUSORY WOULD FALL OUTSIDE THE DEFI NITION OF INCOME UNDER S.2(24) OF THE ACT AND CANNOT BE BROUGHT TO T AX UNDER S.115JB OF THE ACT. WE FIND MERIT IN THE PLEA OF THE ASSESSEE THAT WHAT IS NOT ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 52 - INCOME AT ALL CANNOT BE TAXED UNDER S.115JB OF THE ACT IN VIEW OF SUB- SECTION 5 THEREOF. SUCH CONSIDERATION RECEIVABLE O N HAPPENING OF CERTAIN EVENTS IS NOT CHARGEABLE TO TAX UNDER S. 4 R.W.S. 5 OF THE ACT. 16.5 THE ISSUE IS NO LONGER RES INTEGRA AND EXAMINED BY THE HONBLE SUPREME COURT IN INDO RAMA SYNTHETICS (SUPRA). WE ALSO TAKE NOTE OF THE DECISION OF THE CO-ORDINATE BENCH IN JSW STEEL LTD. (2017) 82 TAXMANN.COM 210 (MUM); SHIVALIK VENTURE PVT. LTD. V S. DCIT (2015) 60 TAXMANN.COM 314 (MUM); ACIT VS. SHREE CEMENT LTD . (2015) 52 ITD 561 (JAIPUR) AND OTHER DECISIONS RELIED UPON ON BEHALF OF THE ASSESSEE FOR THE PROPOSITION THAT BOOK PROFIT CAN B E SUITABLY ADJUSTED WHERE THE P&L ACCOUNT IS NOT DRAWN IN ACCORDANCE WI TH PART II AND PART III OF THE SCHEDULE VI TO THE COMPANIES ACT, 1 956. IN VIEW OF THE PECULIAR FACTS OF THE CASE AND IN THE LIGHT OF LONG LINE OF JUDICIAL PRECEDENTS AVAILABLE IN THIS REGARD, WE HAVE NO HES ITATION TO HOLD THAT THE CONSIDERATION RECOGNIZED AS REVENUE INCOME IN C ONNECTION WITH MOU/LEASE AGREEMENT WITH AIPL, WHICH IS ONLY HYPOTH ETICAL AT PRESENT AND NEITHER ACCRUED NOR EARNED INCOME OF TH E ASSESSEE IS OUTSIDE THE PURVIEW OF INCOME UNDER S.2(24) OF THE ACT AND CONSEQUENTLY, SUCH CONSIDERATION IS OUTSIDE THE AMB IT OF SECTION 4 OF THE ACT AND IN TURN S.115JB OF THE ACT NOTWITHSTAND ING THE AMOUNT HAVING BEEN CREDITED IN THE P&L ACCOUNT AS REVENUE INCOME OF THE ASSESSEE. THE CIT(A) HAVING ARRIVED AT A FINDING T HAT THE RECEIPT FROM AIPL ARE CONTINGENT IN NATURE AND LIABLE TO BE RETU RNED IN THE EVENT OF NON FULFILLMENT OF CONDITIONS OF THE AGREEMENT, COU LD NOT HAVE ARRIVED AT A FINDING ADVERSE TO THE ASSESSEE FOR THE PURPOS ES OF DETERMINATION OF BOOK PROFIT UNDER S.115JB OF THE ACT MERELY BECA USE OF IT BEING RECOGNIZED IN THE P&L ACCOUNT BY THE ASSESSEE. WE ARE THUS OF THE CONSIDERED VIEW THAT UNACCRUED INCOME FROM SEZ PROJ ECT AMOUNTING TO RS.97,72,11,000/- CANNOT BE TAKEN INTO ACCOUNT FOR THE PURPOSES OF DETERMINATION OF BOOK PROFIT UNDER S.115JB OF THE A CT AND TAX LIABILITY ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 53 - CANNOT BE FASTENED ON THE ASSESSEE ON THIS SCORE. THEREFORE, WE FIND MERIT IN THE APPEAL OF THE ASSESSEE. THE OBSCURE A ND UNINTELLIGIBLE ORDER OF THE CIT(A) IS CONSEQUENTLY SET ASIDE AND T HE AO IS DIRECTED TO EXCLUDE THE AFORESAID INCOME FOR THE PURPOSES OF DE TERMINATION OF BOOK PROFITS. 16.6 IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA N O. 2179/AHD/2011 FOR AY 2008-09 IS ALLOWED. CO NO. 237/AHD/2011 A.Y. 2008-09 (IN ITA NO.2122/AH D/2011) 17. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER: 1. THE LD. CIT (A)- VIII, AHMEDABAD AFTER GOING TH ROUGH THE DETAILS AND SUBMISSIONS MADE BY THE RESPONDENT AS WELL AS AFTER DULY CONSID ERING THE VARIOUS FACTS OF THE CASE AS WELL AS VARIOUS CASE LAWS HAS RIGHTLY GIVEN THE DIRECTION TO THE A.O TO TREAT THE AMOUNT RECEIVED FROM M/S. ABIR INVESTMENT PVT. LTD., AS ADVANCE RECEIPT IN A.Y. 2012-13AS PER THE PROVISIONS OF LAW. 2. THE LD. CIT(A) - VIII, AHMEDABAD AFTER CONSIDERI NG THE FACTS OF THE CASE, SUBMISSION OF THE RESPONDENT HAS RIGHTLY HELD IN LA W AND ON FACTS THAT 'LOOKING TO THE SUBMISSION OF THE LD. AR, FACTS OF THE CASE AND VARIOUS LEGAL CITATIONS, DIRECTED THE A.O TO ALLOW THE CLAIM OF THE RESPONDENT U/S. 8 0IB(10) OF THE ACT AMOUNTING TO RS. 17,15,66,503/-'. 3. THE LD. CIT(A) - VIII, AHMEDABAD AFTER CAREFULLY CONSIDERING THE FACTS OF THE CASE, SUBMISSION OF THE RESPONDENT AS WELL AS THE VARIOUS CASE LAWS RELIED UPON BY THE RESPONDENT HAS RIGHTLY GIVEN THE DIRECTION TO THE A .O TO DELETE THE DISALLOWANCE OF INTEREST AMOUNTING TO RS. 1,31,00,000/-. 17.1 THE CROSS OBJECTION FILED BY THE ASSESSEE IN R EVENUES APPEAL MERELY SUPPORTS THE ORDER OF THE CIT(A). AS PER SE CTION 253(4) OF THE ACT, THE ASSESSEE IS ENTITLED TO FILE CROSS OBJECTI ON AGAINST ANY PART OF THE ORDER OF THE COMMISSIONER (APPEALS). IN THE AB SENCE OF ANY OBJECTION TO THE ORDER OF THE CIT(A) ON ISSUES RAIS ED IN THE REVENUES APPEAL, THE CROSS OBJECTION IS HOLLOW AND A DAMP SQ UIB. THIS APART, THE REVENUES APPEAL IS DISMISSED AND CONSEQUENTLY, THE CROSS OBJECTION IS RENDERED INFRUCTUOUS. ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 54 - 17.2 IN THE RESULT, CROSS OBJECTION OF THE ASSESSEE DISMISSED AS INFRUCTUOUS. ITA NO. 2898/AHD/2013 A.Y. 2007-08 (REVENUES APPEA L) 18. THE GROUNDS OF APPEAL RAISED BY THE REVENUE RE ADS AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.23,11,02,617/- MADE U/S. 80IB(10) OF THE ACT REL YING ON THE DECISION IN THE CASE OF RADHE DEVELOPERS FOR A.Y. 2003-04 WITHOUT PROPER LY APPRECIATING THE FACTS OF THE CASE THAT THE ASSESSEE DID NOT SATISFY THE CON DITIONS AS LAID DOWN IN THE SAID SECTION. 2. THE LD. CIT(A), HOWEVER, FAILED TO APPRECIATE TH E FACT THAT THE ASSESSEE COMPANY DID NOT SATISFY THE CONDITION WITH REGARD TO BUILT UP AREA AS THE ASSESSING OFFICER ESTABLISHED THAT THE BUILT UP AREA OF EACH UNIT IN CASE OF ASSESSEE EXCEEDED 1500 SQ.FT. 3. THE LD. CIT(A) HAS FURTHER ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF INTEREST OF RS.7,97,90,760/- MADE U/S.36(1)(III) OF THE ACT WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 19. THE GROUND NO.1 OF THE REVENUES APPEAL CONCERN S DISALLOWANCE OF DEDUCTION UNDER S.80IB(10) OF THE ACT CONCERNING AY 2007-08 IN QUESTION. THE ISSUE IS IDENTICAL TO THE GROUND NO. 2 OF THE REVENUES APPEAL IN AY 2008-09 (SUPRA). IN PARITY WITH THE C ONCLUSION DRAWN IN AY 2008-09 IN REVENUES APPEAL, GROUND NO.1 OF THE REVENUES APPEAL IS DISMISSED. 20. GROUND NO.2 OF THE REVENUES APPEAL CONCERNS DE DUCTION UNDER S.80IB(10) OF THE ACT WHEREIN OBJECTION HAS BEEN RA ISED BY THE REVENUE THAT THE TERMS AND THE CONDITIONS OF ELIGIB ILITY OF DEDUCTION HAS BEEN BREACHED IN AS MUCH AS THE BUILT UP AREA O F THE RESIDENTIAL UNITS EXCEEDED 1500 SQ.FT. IN THE COURSE OF HEARIN G, THE LEARNED DR FOR THE REVENUE COULD NOT REBUT THE SPECIFIC FINDIN G OF THE CIT(A) IN PARA 5.3.8 OF ITS ORDER WHEREIN IT WAS CONCLUDED BY THE CIT(A) THAT THE BUILT UP AREA IS BELOW 1500 SQ.FT. ON THE BASIS OF DOCUMENTARY ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 55 - EVIDENCES. WE THUS DECLINE TO INTERFERE WITH THE O RDER OF THE CIT(A). GROUND NO.2 OF THE REVENUES APPEAL IS DISMISSED. 21. GROUND NO.3 OF THE REVENUES APPEAL CONCERNS DI SALLOWANCE OF INTEREST UNDER S.36(1)(III) OF THE ACT, THE ISSUE B EING IDENTICAL TO GROUND NO.3 OF THE REVENUES APPEAL IN AY 2008-09 A ND THE FACTS BEING SIMILAR, OUR OBSERVATIONS CONCERNING AY 2008- 09 SHALL APPLY MUTATIS MUTANDIS. CONSEQUENTLY, WE DO NOT SEE ANY MERIT IN THE OBJECTION RAISED BY THE REVENUE ON THIS SCORE. GRO UND NO.3 OF THE REVENUES APPEAL IS DISMISSED. 22. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 2898/AHD/2013 FOR AY 2007-08 IS DISMISSED. CO NO. 67/AHD/2014 A.Y. 2007-08 (IN ITA NO.2898/AHD /2013) 23. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER: 1. THE LD. CIT(A)-VIII, AHMEDABAD AFTER GOING THROU GH THE DETAILS AND SUBMISSIONS MADE BY THE RESPONDENT AS WELL AS AFTER DULY CONSID ERING THE VARIOUS FACTS OF THE CASE AS WELL AS VARIOUS CASE LAWS HAS RIGHTLY GIVEN THE DIRECTION TO THE A.O TO ALLOW THE CLAIM OF THE APPELLANT COMPANY U/S.8016(1 0) OF RS.17,15,66,503/-. 2. THE LD. CIT(A)-VIII, AHMEDABAD AFTER CONSIDERING THE FACTS OF THE CASE, SUBMISSION OF THE RESPONDENT HAS RIGHTLY HELD THAT 'THE FACTS OF THE CURRENT YEAR ARE IDENTICAL, PROJECTS FOR WHICH THE DEDUCTION IS CLAIMED ARE ALSO THE SAME AND THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF PR EDECESSOR THE CLAIM OF THE APPELLANT IS ALLOWED FOR THIS YEAR AS WELL AND THUS THE CIT(A)-VIII HAS RIGHTLY GIVEN DIRECTION TO THE LD. A.O. TO DELETE THE DISAL LOWANCE MADE OF RS.17,15,66,503/-. 3. THE LD. CIT(A)-VIII HAS RIGHTLY DIRECTED THE LD. A.O. TO ALLOW THE CLAIM OF DEDUCTION U/S. 80IB(10) IN VIEW OF THE DECISION OF JURISDICTIONAL HON'BLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. RADHEY DEVELOPERS REPORTED IN (2012) 341 ITR 403 (GUJ) AND AFFIRMED BY THE APEX COURT IN THE CASE OF ACIT (OSD), BARODA VS. M/S. SOMESHWARA DEVELOPERS ARISING FROM THE JUDGMENT AND ORDER DATED 11-1-2012 IN ITA NO. 1300/ 2008 OF THE HON'BLE GUJARAT HIGH COURT FOLLOWING THE DECISION OF RADHE DEVELOPE RS. 4. THE LD. CIT(A) - VIII, AHMEDABAD AFTER CAREFULLY CONSIDERING THE FACTS OF THE CASE, SUBMISSION OF THE RESPONDENT AS WELL AS THE VARIOUS CASE LAWS RELIED UPON BY THE RESPONDENT AND RESPECTFULLY FOLLOWING THE DECISION OF PREDECESSOR HAS RIGHTLY ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 56 - GIVEN THE DIRECTION TO THE A.O TO DELETE THE DISALL OWANCE OF INTEREST AMOUNTING TO RS. 7,97,90,760/-. 24. ALL THE GROUNDS RAISED IN THE MEMORANDUM OF CRO SS OBJECTION FILED BY THE ASSESSEE MERELY SUPPORTS THE ORDER OF THE CIT(A). IN THE ABSENCE OF ANY OBJECTION PER SE TO THE ORDER OF THE CIT(A) AND ALSO IN THE LIGHT OF THE FACT THAT REVENUES APPEAL CONCERN ING AY 2007-08 IS DISMISSED, THE CROSS OBJECTION OF THE ASSESSEE IS R ENDERED INFRUCTUOUS. 25. IN THE RESULT, CROSS OBJECTION OF THE ASSESSEE DISMISSED AS INFRUCTUOUS. ITA NO. 452/AHD/2014 A.Y. 2009-10 (REVENUES APPEAL ) 26. THE GROUNDS OF APPEAL RAISED BY THE REVENUE RE ADS AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.71,99,242/- MADE U/S. 80IB(10) OF THE ACT RELYIN G ON THE APPELLATE ORDER OF THE PREDECESSOR IN THE CASE OF ASSESSEE FOR A.Y. 2008-0 9 IN WHICH RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF RADHE DEVELOPERS IN ITA NO. 2842/AHD/2006, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND MATERIAL BROUGHT ON RECORD. 2. THE LD. CIT(A), HOWEVER, FAILED TO APPRECIATE TH E FACT THAT THE ASSESSEE COMPANY DID NOT SATISFY THE CONDITION WITH REGARD TO BUILT UP AREA AS THE ASSESSING OFFICER ESTABLISHED THAT THE BUILT UP AREA OF EACH UNIT IN CASE OF ASSESSEE EXCEEDED 1500 SQ.FT. 3. THE LD. CIT(A) HAS FURTHER ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF INTEREST OF RS.8,67,12,000/- MADE U/S.36(1)(III) OF THE ACT, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 27. GROUND NOS. 1 & 2 OF THE REVENUES APPEAL CONCE RNS DEDUCTION UNDER S.80IB(10) OF THE ACT. IN PARITY WITH THE VI EW EXPRESSED IN AYS 2008-09 & 2007-08 IN REVENUES APPEAL (SUPRA), THE OBJECTION OF THE REVENUE DOES NOT HOLD ANY WATER. 28. IN THE RESULT, GROUND NOS. 1 & 2 OF THE REVENUE S APPEAL IS DISMISSED. ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 57 - 29. GROUND NO.3 OF THE REVENUES APPEAL CONCERNS DI SALLOWANCE OF INTEREST UNDER S.36(1)(III) OF THE ACT. IN PARITY W ITH THE OBSERVATIONS MADE ON THE ISSUE IN AY 2008-09 IN ITA NO. 2122/AHD /2011, THE OBJECTION RAISED BY THE REVENUE HAS NOT LEGS TO STA ND. 30. GROUND NO.3 OF THE REVENUES APPEAL IS DISMISSE D. 31. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 452/AHD/2014 FOR AY 2009-10 IS DISMISSED. ITA NO. 298/AHD/2014 A.Y. 2009-10 (ASSESSEES APPEA L) 32. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE R EADS AS UNDER:- I. TAXING THE ADVANCE RECEIPT BEING CONTINGENT IN NATURE UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT RS. 50 ,30,13,540/- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS WH ILE HOLDING THAT THE APPELLANT COMPANY IS LIABLE TO TAX ON ADVANCE RECEIPT WHICH I S CONTINGENT IN NATURE AS BOOK PROFIT U/S.115JB OF THE ACT. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS WH ILE GIVING CONTRADICTORY FINDINGS IN RESPECT OF AMOUNT RECEIVED FROM ABIR INVESTMENTS PVT. LTD., WHILE TREATING THE SAID AMOUNT AS ADVANCE RECEIPT BEING CONTINGENT IN NATUR E ON ACCOUNT NON-FULFILLMENT OF PRESCRIBED CONDITIONS OF THE LEASE AGREEMENT VIS-- VIS RULES AND REGULATIONS OF SEZ ON ONE HAND AND HOLDING THAT THE APPELLANT COMPANY IS LIAB LE TO TAX ON SUCH RECEIPT AS BOOK PROFIT U/S.115JB OF THE ACT ON THE OTHER HAND. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN GIVING THE DIRECTION TO THE A.O. TO RE-COMPUTE THE BOOK PROFIT U/S.115JB OF THE ACT BY FOLLOWING THE APPELLATE ORDER PASSED FOR A.Y. 2008-09. 33. THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEA L SEEKS TO ASSAIL THE ALLEGED OBSCURELY IN FINDINGS OF THE CIT(A) TOW ARDS MANNER OF DEALING WITH TAXABILITY UNDER S.115JB OF THE ACT. IT WAS CONTENDED THAT WHERE THE CIT(A) FOUND THAT THE ADVANCE RECEIP TS FROM LESSEE IS NOT IN THE NATURE OF ACCRUAL INCOME, IT COULD NOT B E TAKEN INTO ACCOUNTS FOR THE PURPOSES OF S. 115JB EITHER. THE ISSUE HAS BEEN DELIBERATED IN LENGTH IN ASSESSEES APPEAL CONCERNING AY 2008-09 I N ITA NO. 2179/AHD/2011 (SUPRA). THE ISSUE BEING IDENTICAL, OUR CONCLUSION ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 58 - DRAWN CONCERNING AY 2008-09 SHALL HAVE THE SAME EFF ECT FOR AY 2009-10. 34. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA N O. 298/AHD/2014 FOR AY 2009-10 IS ALLOWED. CO NO. 129/AHD/2014 A.Y. 2009-10 (IN ITA NO.452/AHD /2014) 35. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER: 1. THE LD. CIT(A) AFTER CONSIDERING THE FACTS OF T HE CASE, SUBMISSION OF THE RESPONDENT AS WELL AS RELYING ON THE APPELLATE ORDE R PASSED BY THE PREDECESSOR IN THE CASE OF THE APPELLANT COMPANY FOR A.Y. 2008-09 HAS RIGHTLY HELD IN LAW AND ON FACTS THAT 'SINCE A CLEAR FINDING HAS BEEN GIVEN IN THE ABOVE REFERRED ORDER IT WOULD BE JUDICIALLY PRUDENT TO FOLLOW THE SAME. AS OBSERV ED BY THE AO IN THE ORDER, THE FACTS OF THE CURRENT YEAR ARE IDENTICAL, PROJECTS F OR WHICH THE DEDUCTION IS CLAIMED ARE ALSO THE SAME AND THE AO HAS ALSO RELIED UPON T HE FINDING GIVEN IN THE ASSESSMENT YEAR 2008-09. THEREFORE, RESPECTFULLY FO LLOWING THE DECISION OF MY PREDECESSOR THE CLAIM OF THE APPELLANT IS ALLOWED F OR THIS YEAR AS WELL' AND THE LD. CIT (A) HAS RIGHTLY DIRECTED THE AO TO DELETE THE D ISALLOWANCE U/S. 80IB(10) OF THE ACT AMOUNTING TO RS.71,99,242/-. 2. THE LD. CIT (A) AFTER CONSIDERING THE SUBMISSION OF THE RESPONDENT OBSERVED IN HIS ORDER THAT THE COPY OF PLAN, VARIOUS SANCTIONS AND CERTIFICATE OF GOVERNMENT APPROVED ENGINEER ALONGWITH THE DETAILS OF EACH UNI TS OF THE SCHEME AND THE CERTIFICATE CLEARLY INDICATES THAT THE BUILT UP ARE A OF EACH UNIT IS BELOW 1500 SQ.FT.. 3. THE LD. CIT(A) - VIII, AHMEDABAD AFTER CAREFULLY CONSIDERING THE FACTS OF THE CASE, SUBMISSION OF THE RESPONDENT AS WELL AS THE VARIOUS CASE LAWS RELIED UPON BY THE RESPONDENT HAS RIGHTLY GIVEN THE DIRECTION TO THE A .O TO DELETE THE DISALLOWANCE U/S. 36(1)(III)OF THE ACT RS. 8,67,12,000/-. 36. ALL THE GROUNDS RAISED IN THE MEMORANDUM OF CRO SS OBJECTION FILED BY THE ASSESSEE MERELY SUPPORTS THE ORDER OF THE CIT(A). IN THE ABSENCE OF ANY OBJECTION PER SE TO THE ORDER OF THE CIT(A) AND ALSO IN THE LIGHT OF THE FACT THAT REVENUES APPEAL CONCERN ING AY 2007-08 IS DISMISSED, THE CROSS OBJECTION OF THE ASSESSEE IS R ENDERED INFRUCTUOUS. 37. IN THE RESULT, CROSS OBJECTION OF THE ASSESSEE DISMISSED AS INFRUCTUOUS. ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 59 - ITA NO. 3011/AHD/2014 A.Y. 2010-11 (REVENUES APPEA L) 38. THE GROUNDS OF APPEAL RAISED BY THE REVENUE RE ADS AS UNDER:- 1. THE LD. CIT(A) HAS FURTHER ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.8,67,06,000/- MADE U/S.36(1)(III) OF THE ACT, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON R ECORD. 39. THE OBJECTION OF THE REVENUE IN AY 2010-11 CONC ERNING ELIGIBILITY OF INTEREST EXPENDITURE UNDER S.36(1)(I II) OF THE ACT IS IDENTICAL TO THE SIMILAR OBJECTIONS RAISED AS PER G ROUND NO.3 OF AY 2008-09. IN LINE WITH THE DETAILED DISCUSSION MADE IN AY 2008-09 IN REVENUES APPEAL, WE DO NOT SEE ANY FORCE IN THE OB JECTION OF THE REVENUE. 40. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 3011/AHD/2014 FOR AY 2010-11 IS DISMISSED. CO NO. 322/AHD/2014 A.Y. 2010-11 (IN ITA NO.3011/AH D/2014) 41. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER: 1. THE LD. CIT(A) - VIII, AHMEDABAD AFTER CAREFULL Y CONSIDERING THE FACTS OF THE CASE, SUBMISSION OF THE RESPONDENT AS WELL AS THE VARIOUS CASE LAWS RELIED UPON BY THE RESPONDENT AND FOLLOWING THE APPELLATE ORDER FOR A. Y. 2008-09 & 2009-10, HAS RIGHTLY GIVEN THE DIRECTION TO THE A.O TO DELETE TH E DISALLOWANCE U/S. 36(1)(III)OF THE ACT RS. 8,67,06,000/- AS THE ISSUE BEING A COVERED MATTER IN APPELLANTS OWN CASE FOR A.Y. 2008-09 & A.Y. 2009-10. 42. ALL THE GROUNDS RAISED IN THE MEMORANDUM OF CRO SS OBJECTION FILED BY THE ASSESSEE MERELY SUPPORTS THE ORDER OF THE CIT(A). IN THE ABSENCE OF ANY OBJECTION PER SE TO THE ORDER OF THE CIT(A) AND ALSO IN THE LIGHT OF THE FACT THAT REVENUES APPEAL CONCERN ING AY 2007-08 IS DISMISSED, THE CROSS OBJECTION OF THE ASSESSEE IS R ENDERED INFRUCTUOUS. 43. IN THE RESULT, CROSS OBJECTION OF THE ASSESSEE DISMISSED AS INFRUCTUOUS. ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 60 - ITA NO. 3084/AHD/2015 A.Y. 2011-12 (REVENUES APPEA L) 44. THE GROUNDS OF APPEAL RAISED BY THE REVENUE RE ADS AS UNDER:- 1. THE LD. CIT(A) HAS FURTHER ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF INTEREST EXPENSES OF RS.8,50,02,920/- MADE U/S.3 6(1)(III) OF THE ACT, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 45. THE OBJECTION OF THE REVENUE IN AY 2010-11 CONC ERNING ELIGIBILITY OF INTEREST EXPENDITURE UNDER S.36(1)(I II) OF THE ACT IS IDENTICAL TO THE SIMILAR OBJECTIONS RAISED AS PER G ROUND NO.3 OF AY 2008-09. IN LINE WITH THE DETAILED DISCUSSION MADE IN AY 2008-09 IN REVENUES APPEAL, WE DO NOT SEE ANY FORCE IN THE OB JECTION OF THE REVENUE. 46. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 3084/AHD/2015 FOR AY 2011-12 IS DISMISSED. CO NO. 217/AHD/2015 A.Y. 2011-12 (IN ITA NO.3084/AH D/2015) 47. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER: 1. THE LD. CIT(A) - 2, AHMEDABAD AFTER CAREFULLY C ONSIDERING THE FACTS OF THE CASE, SUBMISSION OF THE RESPONDENT, VARIOUS JUDICIAL PRO NOUNCEMENTS RELIED UPON BY THE RESPONDENT INCLUDING OF THE HONBLE JURISDICTIONAL GUJARAT HIGH COURT, JURISDICTIONAL I.T.A.T. AS WELL AS THE DECISION GIV EN BY THE PREDECESSOR OF LD. CIT(A)S IN RESPONDENT COMPANYS OWN CASE FOR A.Y. 2008-09, 2009-10 & 2010-11 HAS CORRECTLY DELETED THE DISALLOWANCE OF INTEREST MADE BY THE ASSESSING OFFICER OF RS.8,50,02,920/- U/S. 36(1)(III) OF THE ACT. 48. ALL THE GROUNDS RAISED IN THE MEMORANDUM OF CRO SS OBJECTION FILED BY THE ASSESSEE MERELY SUPPORTS THE ORDER OF THE CIT(A). IN THE ABSENCE OF ANY OBJECTION PER SE TO ANY PART OF THE ORDER OF THE CIT(A) AND ALSO IN THE LIGHT OF THE FACT THAT REVENUES AP PEAL CONCERNING AY 2007-08 IS DISMISSED, THE CROSS OBJECTION OF THE AS SESSEE IS RENDERED INFRUCTUOUS. ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 61 - 49. IN THE RESULT, CROSS OBJECTION OF THE ASSESSEE DISMISSED AS INFRUCTUOUS. ITA NO. 3085/AHD/2015 A.Y. 2012-13 (REVENUES APPEA L) 50. THE GROUNDS OF APPEAL RAISED BY THE REVENUE RE ADS AS UNDER:- 1. THE LD. CIT(A) HAS FURTHER ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF INTEREST EXPENSES OF RS.8,36,975/- MADE U/S.36(1 )(III) OF THE ACT, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.6,96,18,668/- MADE U/S.14A OF THE ACT, WITHOUT P ROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 51. THE OBJECTION OF THE REVENUE IN AY 2010-11 CONC ERNING ELIGIBILITY OF INTEREST EXPENDITURE UNDER S.36(1)(I II) OF THE ACT IS IDENTICAL TO THE SIMILAR OBJECTIONS RAISED AS PER G ROUND NO.3 OF AY 2008-09. IN LINE WITH THE DETAILED DISCUSSION MADE IN AY 2008-09 IN REVENUES APPEAL, WE DO NOT SEE ANY FORCE IN THE OB JECTION OF THE REVENUE. 52. GROUND NO.2 OF THE REVENUES APPEAL CONCERNS DI SALLOWANCE UNDER S.14A OF THE ACT. THE ASSESSEE CLAIMS TO EAR N NO EXEMPT INCOME. IT HAS HOWEVER SUO MOTU DISALLOWED RS.68,65,382/- AND OFFERED THE SAME IN ITS COMPUTATION OF THE TAXABLE INCOME. THE AO APPLIED RULE 8D AND COMPUTED ADDITION DISALLOWANCE OF RS.6,96,18,668/-. 52.1 IN FIRST APPEAL, HOWEVER, THE CIT(A) SUSTAINED THE ADDITION TO BOOK PROFITS UNDER S.115JB TO THE EXTENT OF SUO MOTU DISALLOWANCE OF RS.68.65 LAKHS MADE BY ASSESSEE. ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 62 - 52.2 AGGRIEVED BY THE DELETION OF DISALLOWANCE OF R S.6,96,18,668/- TOWARDS INTEREST UNDER RULE 8(D)(II) OF I. T. RULES R.W.S. 14A OF THE ACT, THE REVENUE IS IN APPEAL BEFORE ITAT. 52.3 WITH THE ASSISTANCE OF THE LEARNED REPRESENTAT IVES OF THE REVENUE AND ASSESSEE, WE OBSERVE THAT THE ASSESSEE HAS NOT DECLARED ANY EXEMPT INCOME AND CONSEQUENTLY THE PROVISIONS OF SE CTION 14A IS NOT ATTRACTED IN VIEW OF CIT VS. CORRTECH ENERGY (P.) L TD. (2014) 45 TAXMANN.COM 116 (GUJ) AND OTHER SEVERAL DECISIONS I N THIS REGARD. SECONDLY, THE CIT(A) HAS ALSO RECORDED A FINDING TO THE EFFECT THAT INTEREST FREE FUNDS AVAILABLE AT THE DISPOSAL OF AS SESSEE IS IN EXCESS OF AMOUNT OF INVESTMENTS WHICH GIVE RISE TO POTENTIAL EXEMPT INCOME. THUS DISALLOWANCE OF PROPORTIONATE INTEREST IS NOT PERMISSIBLE IN SUCH CIRCUMSTANCES. HENCE, WE DO NOT SEE ANY INFIRMITY IN THE ACTION OF CIT(A) IN DELETING THE DISALLOWANCE OF INTEREST EXP ENDITURE FOR THE PURPOSES OF SECTION 14A OF THE ACT. HENCE, WE DECL INE TO INTERFERE. 52.4 GROUND NO.2 OF THE REVENUES APPEAL IS DISMISS ED. 53. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 3085/AHD/2015 FOR AY 2012-13 IS DISMISSED. CO NO. 218/AHD/2015 A.Y. 2011-12 (IN ITA NO.3085/AH D/2015) 54. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER: 1. THE LD. CIT(A) - 2, AHMEDABAD AFTER CAREFULLY C ONSIDERING THE FACTS OF THE CASE, SUBMISSION OF THE RESPONDENT, VARIOUS JUDICIAL PRO NOUNCEMENTS RELIED UPON BY THE RESPONDENT INCLUDING OF THE HONBLE JURISDICTIONAL GUJARAT HIGH COURT, JURISDICTIONAL I.T.A.T. AS WELL AS THE DECISION GIV EN BY THE PREDECESSOR OF LD. CIT(A)S IN RESPONDENT COMPANYS OWN CASE FOR A.Y. 2008-09 TO 2011-12, HAS CORRECTLY DELETED THE DISALLOWANCE OF INTEREST MADE BY THE ASSESSING OFFICER U/S. 36(1)(III) OF THE ACT OF RS.8,36,975/-. 2. THE LD. CIT(A) - 2, AHMEDABAD AFTER CAREFULLY CO NSIDERING THE FACTS OF THE CASE, SUBMISSION OF THE RESPONDENT, VARIOUS JUDICIAL PRO NOUNCEMENTS RELIED UPON BY THE ITA NO. 2122/AHD/11 & 13 ORS. [GANESH HOUSING CORPORATION LTD.] - 63 - RESPONDENT HAS RIGHTLY DELETED DISALLOWANCE OF RS.6 ,96,18,668/- MADE U/S.14A OF THE ACT BY THE A.O. 55. ALL THE GROUNDS RAISED IN THE MEMORANDUM OF CRO SS OBJECTION FILED BY THE ASSESSEE MERELY SUPPORTS THE ORDER OF THE CIT(A). IN THE ABSENCE OF ANY OBJECTION PER SE TO THE ORDER OF THE CIT(A) AND ALSO IN THE LIGHT OF THE FACT THAT REVENUES APPEAL CONCERN ING AY 2007-08 IS DISMISSED, THE CROSS OBJECTION OF THE ASSESSEE IS R ENDERED INFRUCTUOUS. 56. IN THE RESULT, CROSS OBJECTION OF THE ASSESSEE DISMISSED AS INFRUCTUOUS. 57. IN THE COMBINED RESULT, ALL THE REVENUES APPEA LS ARE DISMISSED WHEREAS ASSESSEES APPEALS ARE ALLOWED AND CROSS OB JECTIONS OF ASSESSEE ARE DISMISSED AS INFRUCTUOUS. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 15/05/2019 S. K. SINHA/TC NAIR !' #' / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. '() * / CONCERNED CIT 4. *- / CIT (A)- 5. ./0 122(), ()!, ' / DR, ITAT, AHMEDABAD 6. 078 / GUARD FILE. BY ORDER / , / ()!, ' THIS ORDER PRONOUNCED IN OPEN COURT ON 15/ 05 /2019