ACIT, Central Circle-3(1), Hyd, Hyderabad V. Konar Greenlands Pvt. Ltd (merged with Hill County Properties Ltd), Hyd, Hyderabad

ITA 1603/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2505 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 29-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: S RAMA RAO
• Keywords: Capital asset; Business income; Cost of acquisition; Date of conversion; Fair market value
• Section: 45(2); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B , HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER I.T.A. NO. 1603/HYD/2016 ASSESSMENT YEAR: 2008-09 ASST. COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE 3(1), HYDERABAD. VS KONAR GREENLANDS PVT. LTD., (MERGED WITH HILL COUNTY PROPERTIES LTD.), HYDERABAD. PAN AABCK 5814A (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI K.J. RAO FOR ASSESSEE : SHRI S. RAMA RAO DATE OF HEARING : 17-05-2017 DATE OF PRONOUNCEMENT : 24-05-2017 O R D E R PER D.S. SUNDER SINGH, A.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDERS OF CIT(A) 11, HYDERABAD, DATED 31/08/2016 FOR THE AY 2008-09 WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUND S OF APPEAL: 1. THE LEARNED CIT(A) ERRED BOTH ON FACTS AND IN L AW. 2. THE LEARNED CIT(A) ERRED IN RELYING ON THE DECIS ION OF THE HON'BLE ITAT IN ITA NO.943 TO 956 AND 1000 TO 1025/ HYD/2014 DT.22-0S-201S IN THE CASE OF ALL THE GROUP COMPANIE S INCLUDING THE ASSESSEE COMPANY FOR THE ASST. YEAR 2009-10, WITHOU T APPRECIATING THAT THE REVENUE HAS PREFERRED APPEALS BEFORE HON'BLE HIGH COURT AGAINST THE AFORE SAID DECISION OF THE ITAT. 3. THE CIT(A) ERRED IN DIRECTING TO REWORK OUT THE TAXABLE INCOME IN ACCORDANCE WITH PARA 38 TO PARA 40 OF THE ITAT'S ORDER, SUPRA. 4. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T THE PROFITS ARISING FROM THE DEVELOPMENT AGREEMENT WITH M/S. MA YTAS I.T.A. NO. 1603/HYD/2016 KONAR GREENLANDS PVT. LTD. :- 2 -: PROPERTIES (NOW KNOWN AS M/S. HILL COUNTY PROPERTIE S PVT. LTD.) INCLUDING TRANSFER OF LAND AND SUBSEQUENT SALE OF APARTMENTS/BUNGLOWS IS CHARGEABLE TO TAX AS BUSINES S INCOME AS PER THE DETAILED REASONING GIVEN BY THE ASSESSING O FFICER. 5. THE LEARNED CIT(A) ERRED IN ALLOWING CHANGE IN R ECOGNITION OF INCOME AND DIRECTING TO ADOPT THE DATE OF REGISTRAT ION OF AGREEMENT OR POSSESSION OF UNITS AS THE DATE OF SAL E OF UNITS FOR THE PURPOSE OF COMPUTING THE INCOME OF THE ASSESSEE . 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE COMPANY FILED ITS RETURN ON 30/09/2008 DECLARING A TOTAL INCOME O F RS.4,51,73,100/- ON ACCOUNT OF LONG TERM CAPITAL GAINS AS WELL AS SH ORT TERM CAPITAL GAINS CLAIMED TO BE ON SALE OF 1.817 ACRES LAND AND THE BUILT UP AREA RECEIVED FROM THE DEVELOPER. THE ASSESSING OFFICER IN AN ORDER U/S. 143(3) DT. 02/12/2010 NOTICED THAT THIS REVENUE CAN NOT BE SEEN IN ISOLATION, AND THAT THE ONLY ACTIVITY OF THE ASSESS EE WAS TO ENTER INTO A COMMON DEVELOPMENT AGREEMENT WITH ANOTHER GROUP COM PANY M/S. MAYTAS PROPERTIES PVT. LTD., ALONG WITH 13 OTHER GR OUP COMPANIES OWNING CONTIGUOUS LANDS. IT WAS, THEREFORE, HELD TH AT THE TRANSACTION WAS AN ORCHESTRATED ACT WITH A UNIFIED BUSINESS MOD EL RATHER THAN A SOLITARY INSTANCE OF TRANSFER OF A CAPITAL ASSET. H E, THEREFORE, CONSIDERED THE GROSS RECEIPTS ASSESSABLE AS BUSINES S INCOME ARISING FROM AN ADVENTURE IN THE NATURE OF TRADE AND DETERM INED TOTAL INCOME OF RS.4,39,94,346/-. 3. THE ASSESSEE FILED AN APPEAL WITH THE CIT(A)-VI I, HYDERABAD ON 10/01/2011 SEEKING RELIEF FROM THE DEMAND RAISED. I T WAS URGED THAT INFERENCES WERE DRAWN ON IRRELEVANT AND EXTRANEOUS FACTS AND THAT THE GROSS REVENUE ACCOUNTED FOR IS NOTHING BUT AN ACCRE TION IN THE CAPITAL FIELD ASSESSABLE UNDER THE HEAD CAPITAL GAINS AND N OT AS INCOME FROM BUSINESS. THE CIT(A) NOTICED THAT THE ASSESSEE DID NOT PAY THE SELF- ASSESSMENT TAX PAYABLE. HE ALSO NOTICED THAT ON A L ATER DATE M/S.IL & FS, WHICH WAS INDUCTED INTO THE GROUP COMPANY M/S. HILL COUNTY PROPERTIES LTD. BY AN ORDER OF THE COMPANY LAW BOAR D DATED I.T.A. NO. 1603/HYD/2016 KONAR GREENLANDS PVT. LTD. :- 3 -: 13/01/2011, ARRANGED FOR THE TAX PORTION OF THE DEM AND TO BE PAID. HOWEVER, THE CIT(A) RELYING S. ALAGARSAMY VS. ITO, 296 ITR 43 (MAD) HELD THAT COMPLIANCE WITH SECTION 249(4) WAS MANDAT ORY AND THAT NO DISCRETION WAS VESTED IN THE CIT(A) IN SUCH MATTERS . HE FURTHER RELIED ON A DECISION OF ITAT HYDERABAD IN SMT BANU BEGUM V S. DCIT, 22 TAXMANN.COM 235 TO THE EFFECT THAT ONLY THE TRIBUNA L WAS VESTED WITH THE DISCRETION TO RESTORE THE MATTERS TO THE CIT(A) IF IT WAS POSSIBLE TO HOLD THAT THE DEFECT HAS BEEN CURED. 4. ON SECOND APPEAL BY THE ASSESSEE, THE ITAT PASS ED AN ORDER DATED 25/07/2014 IN ITA NO.556/HYD/2014 NOTING THE SIMILARITIES WITH THE CASE OF SMT. BANU BEGUM, SUPRA, AND SIMILAR CIR CUMSTANCES IN OTHER GROUP CASES. TAKING COGNIZANCE OF A SUM OF RS ,1,34,36,813/- PAID ON 21/02/2011, 03/06/2011 AND 29/03/2012, IT H ELD THAT THE CASE SHOULD BE ADJUDICATED ON MERITS SINCE THE ADMITTED TAXES HAVE NOW BEEN PAID. 5. BEFORE THE CIT(A), LD. AR OF THE ASSESSEE STATE D THAT PROCEEDINGS ARE NOW BEING CONDUCTED BY M/S. HILL CO UNTY PROPERTIES LTD. WITH WHICH THE ERSTWHILE KONAR GREEN LANDS PVT LTD. HAD MERGED IN CONSEQUENCE OF THE HIGH COURT'S ORDER DATED 29/0 9/2015 COPY OF WHICH HAS BEEN PLACED ON RECORD. REGARDING THE MERI TS OF THE CASE, RELIANCE WAS PLACED UPON A COMMON ORDER OF THE ITAT DT. 22/05/2015 (ITA NO.943 TO 956 AND 1000 TO 1025/HYD/2014) PASSE D IN THE CASE OF ALL THE GROUP COMPANIES, INCLUDING THIS ASSESSEE FO R THE SUBSEQUENT AY. 2009-10. RELIANCE WAS ALSO PLACED UPON AN ORDER OF THE ASSESSING OFFICER, CENTRAL CIRCLE 3(2) DT. 21/03/2016 IN THE CASE OF THE ASSESSEE, FOR THE SUBSEQUENT ASSESSMENT YEAR 2009-10, GIVING EFFECT TO THE DIRECTIONS OF THE ITAT IN THE ABOVE REFERRED ORDER PASSED ON IDENTICAL FACTS. I.T.A. NO. 1603/HYD/2016 KONAR GREENLANDS PVT. LTD. :- 4 -: 6. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FOLLOWING THE DECISION OF THE ITAT IN THE CASE OF ALL THE GROUP COMPANIES IN ITA NO. 943 TO 956 AND 1000 TO 1025/HY D/2014, DATED 22/05/2015 OBSERVED THAT HAVING REGARD TO THE ADJUD ICATION OF LAW AND LAYING DOWN OF A METHOD OF COMPUTATION OF TAXABLE I NCOME CONTAINED IN THE SAID ORDER OF ITAT, WHICH IS A JURISDICTIONALLY BINDING PRECEDENT, AND HAVING REGARD TO THE IDENTICAL NATURE OF FACTS IN THE PRESENT AY, THE AO IS DIRECTED TO REWORK THE TAXABLE INCOME DET ERMINED IN ACCORDANCE WITH PARA 38 TO PARA 40 OF THE ITATS OR DER. 7. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US. 8. THE LD. DR CONTENDED THAT CIT(A) OUGHT TO HAVE A PPRECIATED THAT THE PROFITS ARISING FROM THE DEVELOPMENT AGREEMENT WITH M/S. MAYTAS PROPERTIES (NOW KNOWN AS M/S. HILL COUNTY PROPERTIE S PVT. LTD.) INCLUDING TRANSFER OF LAND AND SUBSEQUENT SALE OF A PARTMENTS/BUNGLOWS IS CHARGEABLE TO TAX AS BUSINESS INCOME AS PER THE DETAILED REASONING GIVEN BY THE ASSESSING OFFICER. HE FURTHER CONTENDE D THAT CIT(A) ERRED IN ALLOWING CHANGE IN RECOGNITION OF INCOME A ND DIRECTING TO ADOPT THE DATE OF REGISTRATION OF AGREEMENT OR POSS ESSION OF UNITS AS THE DATE OF SALE OF UNITS FOR THE PURPOSE OF COMPUT ING THE INCOME OF THE ASSESSEE. 9. LD. AR OF THE ASSESSEE, ON THE OTHER HAND, RELI ED UPON THE ORDER OF CIT(A). 10. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. FOR THE SAKE OF CLARITY, PARA NOS. 38 TO 40 OF THE ORDER PASSED BY THE ITAT IN THE GROUP CASES, EXTRACTED AS BELOW: 38. IN SO FAR AS COMPUTATION OF CAPITAL GAIN ON SU CH CONVERSION IS CONCERNED, S.45(2) SPECIFICALLY PROVIDES THAT THE FAIR MARKET VALUE OF THE ASSET ON THE DATE OF CONVERSION FOR THE PURPOSES OF S.48, SHALL BE DEEME D TO BE THE FULL VALUE OF I.T.A. NO. 1603/HYD/2016 KONAR GREENLANDS PVT. LTD. :- 5 -: CONSIDERATION REALISED OR ACCRUING ON TRANSFER OF T HE CAPITAL ASST. IN THE PRESENT CASE, 27% OF THE BUILT UP AREA OF THE PROJECT WAS R ECEIVED BY THE ASSESSEE AS CONSIDERATION FOR TRANSFER OF 73% OF THE LAND AREA, AND THEREFORE, COST OF CONSTRUCTION OF THIS 27% AREA CAN REASONABLY BE TAK EN AS THE FAIR MARKET VALUE OF 73% OF THE LAND AREA ON THE DATE OF CONVERSION. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THIS REGARD, THE TOTAL COST OF CONSTRUCTION OF THE PROJECT WAS INITIALLY ESTIMATED BY THE DEVELOPER AT RS.410 CRORES FOR THE TOTAL BUILT UP AREA OF 26.94 LAKHS SQ. FT. WHICH GIVES THE RATE OF COST OF CONSTRUCTION AT AROUND RS.1,500 PER SQ. FT. APPLYING THE SAID RATE, THE COST OF CON STRUCTION OF THE 27% OF THE TOTAL BUILT UP AREA OF THE PROJECT COMES TO AROUND RS.110 CRORES AND THE SAME, IN OUR OPINION, CAN REASONABLY BE TAKEN AS FAIR MARKET VAL UE OF THE 73% OF THE LAND AREA AND ACCORDINGLY, FAIR MARKET VALUE OF THE TOTAL LAN D CAN BE WORKED OUT ON PRO-RATA BASIS, FOR ADOPTING THE SAME AS FULL VALUE OF THE C ONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET FO R THE PURPOSES OF S.48 IN ORDER TO COMPUTE THE CAPITAL GAINS. FROM THE VALUE SO ADOPTE D, INDEXED COST OF ACQUISITION OF THE ASSET CAN BE REDUCED IN ORDER TO COMPUTE THE CAPITAL GAINS ARISING TO THE ASSESSEE COMPANY ON TRANSFER OF LAND BY WAY OF DEVE LOPMENT AGREEMENT, WHICH SIMULTANEOUSLY RESULTED IN CONVERSION OF CAPITAL AS SET INTO STOCK IN TRADE. THIS CAPITAL GAINS WOULD BE CHARGEABLE TO TAX IN THE HAN DS OF THE ASSESSEE COMPANY ON PRO RATA BASIS AS AND WHEN THE STOCK IN TRADE IN TH E FORM OF FLATS AND BUNGALOWS COMPRISED OF BUILT UP AREA AND PROPORTIONATE SHARE IN LAND IS SOLD, WHILE THE AMOUNT RECEIVED OVER AND ABOVE THE COST OF SUCH FLA TS AND BUNGALOWS WOULD BE CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE COMP ANY AS BUSINESS INCOME. THE FOLLOWING ILLUSTRATION BASED ON HYPOTHETICAL FIGURE S GIVING THE WORKING OF CAPITAL GAINS AND BUSINESS INCOME WOULD MAKE THE MATTER ABU NDANTLY CLEAR HYPOTHETICAL EXAMPLE- 10,000 SQ. FT. LAND TRANSFERRED AS PER DEVELOPMENT AGREEMENT FOR CONSIDERATION OF 3000 SQ. FT. BUILT UP/CONSTRUCTED AREA. DATE OF DEVELOPMENT AGREEMENT IS TAKEN AS DATE OF T RANSFER AS WELL AS DATE OF CONVERSION. CONVERSION OF 10000 SQ. FT. LAND - 3000 SQ. FT. IS RETAINED IN THE FORM OF LAND & 7000 SQ. FT. IS CONVERTED INTO 3000 SQ. FT. CONSTRU CTED AREA. STOCK IN TRADE AVAILABLE TO TRANSFEROR ON CONVERSIO N: 3,000 SQ. FT. LAND AREA AND 3,000 SQ.FT. CONSTRUCTE D AREA I.E. 3,000 SQ. FT. BUILT UP AREA ALONGWITH PROPORTI ONATE UNDIVIDED SHARE IN LAND. COMPUTATION OF CAPITAL GAINS AND BUSINESS PROFIT AREA OF LAND TRANSFERRED AS PER DEVELOPMENT AGREEME NT 7,000 SQ. FT. CONSIDERATION FOR TRANSFER OF 7,000 SQ. FT. 3,000 S Q. FT. (CONSTRUCTED AREA) RATE OF CONSTRUCTION, SAY RS. 1,500 PER SQ. FT. I.T.A. NO. 1603/HYD/2016 KONAR GREENLANDS PVT. LTD. :- 6 -: COST OF CONSTRUCTION OF 3,000 SQ. FT. (TO BE TAKEN AS CONSIDERATION/MARKET VALUE OF 7,000 SQ. FT. LAND AR EA) RS.45,00,000 CONSIDERATION/MARKET VALUE OF LAND (45,00,000/7000 SQ. FT.) RS.643/- PER SQ. FT FAIR MARKET VALUE OF 10,000 SQ. FT. LAND @ 643 PER SQ. FT RS. 64,30,000 LESS: INDEXED COST OF ACQUISITION OF 10,000 SQ. FT. LAND SAY @ 193 PER SQ. FT. RS. 19,30,000 CAPITAL GAIN ON CONVERSION OF 10,000 SQ. FT. LAND R S. 45,00,000 CAPITAL GAIN TO BE APPORTIONED ON 3,000 SQ. FT. BUI LT UP AREA (STOCK IN TRADE) ON SALE RS.1,500 PER SQ. FT COST OF STOCK OF 3000 SQ. FT. 64,30,000/ 3000 RS.2143 PER SQ. FT IF STOCK IN TRADE OF 3000 SQ. FT IS SOLD AS FOLLOWS : I YEAR 1000 SQ. FT. @ 3000 PER SQ. FT. 30,00,000 LTCG @ 1500 PER SQ. FT. 15,00,000 PROFIT @ 857 PER SQ. FT.(3000-2143) 8,57,000 II YEAR 1000 SQ. FT. @ 3500 PER SQ. FT. 35,00,000 LTCG @ 1500 PER SQ. FT. 15,00,000 PROFIT @ 1357 PER SQ. FT.(3500-2143) 13,57,00 0 III YEAR 1000 SQ. FT. @ 4000 PER SQ. FT. 40,00,000 LTCG @ 1500 PER SQ. FT 15,00,000 PROFIT @ 1857 PER SQ. FT.(4000-2143) 18,57,000 OVERALL POSITION TOTAL SALES 1,05,00,000 LESS: INDEXED COST OF ACQUISITION 19,30,000 TOTAL PROFITS 85,70,000 -TAXABLE AS CAPITAL GAIN 45,00,000 TAXABLE AS BUSINESS INCOME 40,70,000 39. IN VIEW OF THE ABOVE DISCUSSION, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE INCOME OF THE ASSESSEE FORM TRANSFER OF LAND HELD BY THE ASSESSEE COMPANY AS CAPITAL ASSET BY WAY OF DEVELOPMENT AGRE EMENT AND SUBSEQUENT SALE OF FLATS AND BUNGALOWS RECEIVED AS CONSIDERATION FOR S UCH TRANSFER WHICH TOOK THE CHARACTER OF STOCK IN TRADE ON CONVERSION IN THE MA NNER AND AS PER THE METHOD SPECIFIED ABOVE, RELYING ON THE PROVISIONS OF S.45( 2). WE ACCORDINGLY PARTLY ALLOW GROUNDS NO.2 AND 3 OF THE ASSESSEES APPEAL FOR ASS ESSMENT YEAR 2008-09 AND GROUNDS NO.3 AND 4 OF THE ASSESSEES APPEAL FOR ASS ESSMENT YEAR 2009-10. GROUND NO.4 OF THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2 008-09 AND GROUND NO.5 OF THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2009-10 ARE A LLOWED. I.T.A. NO. 1603/HYD/2016 KONAR GREENLANDS PVT. LTD. :- 7 -: 40. AS REGARDS THE OTHER ISSUES RAISED IN GROUNDS N O.6 AND 7 OF THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2009-10 RELATING TO THE CHANGE IN THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE TO RECOGNIZE TH E INCOME, WE ARE OF THE VIEW THAT THE SAME HAVE BECOME VIRTUALLY REDUNDANT AS A RESULT OF OUR DECISION RENDERED ABOVE HOLDING THAT THE INCOME OF THE ASSESSEE COMPA NY FROM THE RELEVANT TRANSACTIONS IS LIABLE TO BE COMPUTED AS PER THE PR OVISIONS OF S.45(2). THE ONLY ASPECT THAT MAY BE RELEVANT FOR THE PURPOSE OF APPL YING THE PROVISIONS OF S.45(2) IS THE POINT AT WHICH THE FLATS AND BUNGALOWS REPRESEN TING STOCK IN TRADE CAN BE TAKEN AS SOLD OR OTHERWISE TRANSFERRED FOR THE PURPOSE OF RECOGNISING INCOME. IN THIS REGARD, IT IS OBSERVED THAT A SIMILAR ISSUE HAS A B EEN CONSIDERED BY US IN THE CASE OF DEVELOPER COMPANY, VIZ. M/S. HILL COUNTY PROPERT IES LTD. (EARLIER KNOWN AS M/S. MAYTAS PROPERTIES LTD.) AND THE SAME HAS BEEN DECID ED VIDE ORDER OF EVEN DATE PASSED IN ITA NO.1644/HYD/2014 BY OBSERVING AS UNDE R- 35. IN SO FAR AS THE SECOND ASPECT OF THE MATTER I S CONCERNED, IT IS OBSERVED THAT THE CLAIM OF THE ASSESSEE FOR CHANGE IN THE METHOD OF RECOGNIZING THE REVENUE ON THE BASIS OF REGISTRATION OF AGREEMENTS FOR SALE OR HANDING OVER POSSESSION OF THE UNITS TO THE AGREEMENT HOLDERS IS A O BASED ON PRUD ENTIAL NORMS OF REVENUE RECOGNITION AND THE SAME IS SUPPORTED BY ACCOUNTING STANDARD 9, WHICH CLEARLY STATES THAT THE KEY CRITERION FOR DETERMINING WHEN TO RECOGNIZE THE REVENUE FROM A TRANSACTION INVOLVING SALE IS THAT THE SELLER HAS T RANSFERRED THE PROPERTY IN THE GOODS TO THE BUYER FOR A CONSIDERATION. IT IS CLARI FIED THAT THE TRANSFER OF PROPERTY IN GOODS RESULTS IN OR CONNOTES THE TRANSFER OF SIGNIF ICANT RISKS AND REWARDS OF OWNERSHIP TO THE BUYERS. FURTHER, THERE MAY BE SITU ATIONS, WHERE TRANSFER OF PROPERTY IN FACT DOES NOT COINCIDE WITH THE TRANSFE R OF SIGNIFICANT RISKS AND REWARDS OF OWNERSHIP. CASES MAY ARISE WHERE DELIVERY HAS BE EN DELAYED DUE TO THE FAULT OF THE SELLER AND THE GOODS ARE AT THE RISK OF THE PAR TIES AT DEFAULT. 36. AS PER AS-9, RECOGNITION OF REVENUE REQUIRES TH AT REVENUE IS MEASURABLE AND THAT AT THE TIME OF SALE, IT WOULD NOT BE UNREASONA BLE TO EXPECT ULTIMATE COLLECTION. WHERE THE ABILITY TO ASSESS THE ULTIMATE COLLECTION WITH REASONABLE CERTAINTY IS LACKING AT THE TIME OF RAISING ANY CLAIM, REVENUE R ECOGNITION IS POSTPONED TO THE EXTENT OF UNCERTAINTY INVOLVED. IN SUCH CASES, IT M AY BE APPROPRIATE TO RECOGNISE REVENUE ONLY WHEN IT IS REASONABLY CERTAIN THAT THE ULTIMATE COLLECTION WILL BE MADE. WHEN THE UNCERTAINTY RELATING TO COLLECTABILT Y ARISES SUBSEQUENT TO THE TIME OF SALE, IT IS MORE APPROPRIATE TO MAKE A SEPARATE PROVISION TO REFLECT THE UNCERTAINTY. IT IS ALSO PROVIDED THAT WHEN RECOGNIT ION OF REVENUE IS POSTPONED DUE TO THE EFFECT OF UNCERTAINTIES, IT IS CONSIDERED AS REVENUE OF THE PERIOD IN WHICH IT IS PROPERLY RECOGNISED. 37. IN THE PRESENT CASE, AS A RESULT OF EXTRA-ORDIN ARY EVENTS WITNESSED BY THE SATYAM GROUP OF COMPANIES TO WHICH THE ASSESSEE COM PANY BELONGED IN THE MONTH OF JANUARY, 2009, THERE WAS UNCERTAINTY WITH REGARD TO THE COMPLETION OF PROJECT BY THE ASSESSEE COMPANY AND DELIVERY OF UNITS BOOKED. KEEPING IN VIEW THIS UNCERTAINTY, SOME OF THE AGREEMENT HOLDERS TENDERED APPLICATIONS FOR CANCELLATION OF THE UNITS BOOKED AND DEMANDED REFUND OF THE ADVA NCES PAID. SOME OF THE AGREEMENT HOLDERS ALSO FILED CASES AGAINST THE ASSE SSEE COMPANY FOR CANCELLATION OF THE AGREEMENTS AND REFUND OF THE AMOUNTS PAID BY THEM. THE ULTIMATE COLLECTION I.T.A. NO. 1603/HYD/2016 KONAR GREENLANDS PVT. LTD. :- 8 -: FROM THESE AGREEMENT HOLDERS THUS BECAME UNCERTAIN AND THE ASSESSEE COMPANY, IN OUR OPINION, RIGHTLY DECIDED TO POSTPONE THE REVENU E RECOGNITION TO THE EXTENT OF SUCH UNCERTAINTY, BY ADOPTING THE NEW METHOD OF REC OGNITION OF INCOME ON THE BASIS OF REGISTRATION OF AGREEMENTS FOR SALE OR HAN DING OVER OF POSSESSION OF THE UNITS, AS THE SAME ENABLED IT TO ASSESS THE ULTIMAT E COLLECTION WITH REASONABLE CERTAINTY. AS A MATTER OF FACT, THE CLAIM MADE BY S OME OF THE AGREEMENT HOLDERS R CANCELLATION OF AGREEMENTS FOR SALE ALREADY EXECUTE D AND FOR REFUND OF THE ADVANCES ALREADY PAID CRATED UNCERTAINTY RELATING T O COLLECTABILITY WHICH AROSE EVEN AFTER THE OF THE AGREEMENTS FOR SALE, AND THIS UNCERTAINTY WAS ALSO PROVIDED FOR BY THE ASSESSEE BY REVERSING THE INCOME ALREADY RECOGNIZED ON THE BASIS OF EXECUTION OF THE AGREEMENTS FOR SALE. THE CHANGE IN THE METHOD OF RECOGNITION OF INCOME, AS ADOPTED BY THE ASSESSEE COMPANY IN THE Y EAR UNDER CONSIDERATION AS WELL AS THE CONSEQUENT REVERSAL OF INCOME ON THE BA SIS OF CANCELLATION/LEGAL CASES THUS WAS IN TERMS OF THE RELEVANT ACCOUNTING STANDA RD LAYING DOWN PRUDENTIAL NORMS OF REVENUE RECOGNITION, AND AS HELD BY THE CO ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09, THE SAME WAS LEGALLY CORRECT UNDER THE MERCANTILE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE COMPANY. IT IS PERTINENT TO NOTE HERE THAT THE AP STATE CONSUMER D ISPUTE REDRESSAL COMMISSION, HYDERABAD (VIDE ITS ORDER AT PAGES 38 TO 55 OF THE PAPER BOOK) AS WELL AS NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI ( VIDE ORDER AT PAGES 56 TO 87 OF THE ASSESSEES PAPERBOOK) SUBSEQUENTLY ALLOWE D THE CLAIM OF THE AGREEMENT HOLDERS SEEKING CANCELLATION OF THE AGREEMENTS FOR SALE AND ALSO DIRECTED THE ASSESSEE COMPANY TO REFUND THE AMOUNTS PAID BY THEM ALONG WITH INTEREST, AND EVEN THE SLP FILED BY THE ASSESSEE AGAINST THE ORDE R OF THE NATIONAL CONSUMER DISPUTE REDRESSAL COMMISSION WAS DISMISSED BY THE H ONBLE SUPREME COURT. THESE SUBSEQUENT EVENTS CLEARLY SHOW THAT THERE WAS AN UNCERTAINTY IN ASSESSING THE ULTIMATE COL ION AND REVENUE RECOGNITION WAS RI GHTLY POSTPONED BY THE ASSESSEE COMPANY TO THE EXTENT OF SUCH UNCERTAINTY INVOLVED BY CHANGING THE METHOD OF RECOGNITION OF INCOME AS WELL AS PROVIDING FOR REVE RSAL OF REVENUE ALREADY RECOGNISED EARLIER ON THE BASIS OF CANCELLATIONS/LE GAL CASES. FOLLOWING OUR DECISION RENDERED IN THE CASE OF M/S. HILL COUNTY PROPERTIES LTD. (SUPRA), WE DIRECT THE ASSESSING OFFICER TO ADOPT T HE DATE OF REGISTRATION OF AGREEMENT OR POSSESSION OF UNITS AS THE DATE OF SAL E OF UNITS FOR THE PURPOSE OF COMPUTING THE INCOME OF THE ASSESSEE AS PER THE PRO VISIONS OF SECTION 45(2) OF THE ACT. AS THE DECISION OF THE CIT(A) IS IN CONSONANCE WITH THE ORDER OF THE ITAT PASSED IN THE GROUP CASES, FOLLOWING THE SAME, WE DISMISS THE GROUNDS RAISED BY THE REVENUE. I.T.A. NO. 1603/HYD/2016 KONAR GREENLANDS PVT. LTD. :- 9 -: 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON 24 TH MAY, 2017. SD/- SD/- (D. MANMOHAN) (D.S. SUNDER SINGH) VICE PRESIDENT ACCOUNTANT MEMBER HYDERABAD, DATED: 24 TH MAY , 2017. KV 1 ACIT, CENTRAL CIRCLE 3(1), 7 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD - 500 004 2 M/S KONAR GREENLANDS PVT. LTD., H.NO. 2-13/31, SS NAGAR, OPP. HYDERNAGAR, HYDERABAD 38. 3 CIT (A)-11, HYDERABAD. 4 PR. CIT (CENTRAL), HYDERABAD. 5 THE DR, ITAT HYDERABAD 6 GUARD FILE 1. DRAFT DICTATED ON 2. DRAFT PLACED BEFORE AUTHOR 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR.P.S./PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER