ITO, Corporate Ward 6(4), Chennai V. Suhavana Developers Pvt Ltd, Chennai

ITA 145/CHNY/2018

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1265 (ITAT-CHENNAI)
• Duration Of Justice: 6 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-05-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 09-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NILAY BARAN SOM LD
• Section: 143(3); 64; 22

Judgement Text

आयकर अपीलीय अिधकरण ‘ए’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI माननीय +ी मनोज कु मार अ/वाल ,लेखा सद4 एवं माननीय +ी मनु कु मार िग7र, ाियक सद4 के सम8। BEFORE HON’BLE SHRI MANOJ KUMAR AGGARWAL, AMANDHON’BLE SHRI MANU KUMAR GIRI, JM आयकरअपीलसं./ ITA No.145 /Chn y/2018 (िनधा9रणवष9 / As sessment Year: 2014-15) ITO Corporate Ward-6(4), Chennai. बनाम/ V s . M/s Suhavana Developers P. Ltd. Trimex Towers, No.1, Subbaraya Avenue, C.P.Ramaswamy Road, Alwarpet, Chennai-600 018. थायीलेखासं./जीआइआरसं./PAN/GIR No.AAMCS-2274-F (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ कीओरसे/ Assessee by : Shri D. Anand (Advocate) - Ld.AR थ कीओरसे/Revenue by : Shri Nilay Baran Som (CIT) – Ld. DR सुनवाईकीतारीख/Date of Hearing : 27-05-2024 घोषणाकीतारीख /Date of Pronouncement : 03-07-2024 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by revenue for Assessment Year (AY) 2014-15 arises out of the order of learned Commissioner of Income Tax (Appeals)-15, Chennai [CIT(A)] dated 28-09-2017 in the matter of an assessment framed by learned Assessing Officer u/s 143(3) of the Act on 27-12-2016. The revenue is aggrieved by deletion of certain addition as made by Ld. AO in the assessment order. Having heard rival submissions, our adjudication would be as under. The assessee being a corporate entity is stated to be engaged in development of real estates. 2 Proceedings before lower authorities 2.1 During assessment proceedings, it transpired that the assessee purchased 28 grounds and 1952 Sq. Ft. of land in Kotturpuram, Chennai on 11-08-2009 and it entered into a Joint Development Agreement (JDA) with M/s Appaswamy Real Estates Ltd. (AREL) on 02-09-2009. As per terms, the assessee was entitled for 60% of constructed super-built up area. In the meanwhile, supplementary agreements were entered into between the parties on 10-12-2010 & 07-03-2011 modifying the terms of the agreement. 2.2 The Ld. AO, upon perusal of the terms of the agreement, noted that the income accrues to the assessee the moment AERL collects money from prospective buyers and accordingly, 60% thereof would accrue to the assessee. The assessee was not responsible for any further obligation or expenses towards construction of the project or its completion. The assessee received amount from customers through AERL for Rs.28.97 Crores in this year which was not disclosed in the return of income. As per record, the projects consist of 64 flats and by 31-03-2014, 22 flats were sold by the builder which works out to 34%. The agreements were entered into by the builder with 22 customers and 74% of the agreed amount was collected till 31-03-2014. Out of the same, the assessee received 60% of the amount i.e., Rs.26.01 Crores. However, the assessee did not admit any income during this year. The same need to be brought to tax. 2.3 The assessee submitted that income was recognized on completion of transfer of UDS and upon completion of construction. However, Ld. AO rejected the books of the assessee. The Ld. AO estimated sale price of entire 64 flats out of which 60% would accrue to 3 the assessee. The same worked out to be Rs.114.93 Crores. After reducing corresponding cost of Rs.49.92 Crores, Ld. AO estimated income at Rs.65.01 Crores and finalized the assessment. Appellate proceedings 3. The Ld. CIT(A), after considering details submissions of the assessee, concurred that money received by the assessee was mere advance and there was no transfer of title to prospective buyer. Further, the builder had entered into sale agreement only for 22 flats and sale against those flat was not registered during this year. Since there was no transfer of title, the assessment of entire advances was not correct. The assessee followed accounting policy wherein it recognized revenue only on substantial completion of the project and transfer of UDS to the ultimate buyer. Since the assessee was mere land owner, AS-7 issued by ICAI for construction contracts would not apply to the case of the assessee. In para 4.3.10 of the order, Ld. CIT(A) rendered a finding that the assessee accounted net profit after transfer of UDS to the extent of Rs.28.49 Lacs in AY 2015-16 and Rs.21.14 Crores in AY 2016-17. Taxing the same prematurely would amount to double taxation. The Ld CIT(A), in para 4.3.14, summarized the factual position and held that the money received by the assessee was merely an advance and there was no transfer of title to the buyers. It was finally held that the assessee as a land owner had been recognizing income correctly in the relevant AY when there was transfer of UDS thought sale deeds to the flat buyers. Therefore, the working of Ld. AO was rejected against which the revenue is in further appeal before us. 4 Our findings and Adjudication 4. From the facts, it emerges that the assessee has merely acted as a land owner under JDA and it has no further obligation under JDA. In such a case, Accounting Standard-7, as rightly held by Ld. CIT(A), would not be applicable to the case of the assessee. The assessee, following a particular method of accounting, has offered income under the agreement as and when UDS has been transferred through sale deeds. It is another finding that the income under the contract has fully been offered in subsequent years and taxing the same prematurely would amount to double taxation. The Ld. AR has summarized the revenue offered by the assessee in subsequent years in respect of JDA which is kept on page no. 1 of the paper-book. The perusal of the same would show that the income arising out of JDA has fully been offered to tax in other years. The said fact remains uncontroverted before us. Further, in this year, AERL has entered into sale agreement for 22 flats out of 64 flats and sale against those flat was not registered during this year. Since there was no transfer of title, no income could be said to have accrued to the assessee in this year. The money so received during the year merely represent advance for sale of UDS and the income would accrue to the assessee only upon registration of sale deeds. Therefore, in our opinion, Ld. CIT(A) has clinched the issue in correct perspective which do not require any interference on our part. 5. The appeal stand dismissed. Order pronounced on 3 rd July, 2024 Sd/- (MANU KUMAR GIRI) ाियक सद4 / JUDICIAL MEMBER Sd/- (MANOJ KUMAR AGGARWAL) लेखासद4 /ACCOUNTANT MEMBER 5 चे4ईChennai; िदनांकDated :03-07-2024 DS आदेशकीPितिलिपअ/ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. थ /Respondent 3. आयकरआयु=/CIT Chennai 4. िवभागीय ितिनिध/DR 5. गाडBफाईल/GF