PRABHAKAR CORPORATION, MUMBAI V. ADDL CIT RG 22(1), MUMBAI

ITA 3741/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5000 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 03-09-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 10-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY MEHTA IZRFKHZ DH LS
• Keywords: Capital asset; Business income

Judgement Text

M/S PRABHAKAR CORPORATION - 1 - VK;DJ VIHYH; VF/KDJ.K LH U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI JH VKJ JH VKJ JH VKJ JH VKJ- -- - DS DS DS DS- -- - XQIRK] U;KF;D LNL; ,OA JH JKTSUNZ FLAG YS[KK LNL; DS LE{K XQIRK] U;KF;D LNL; ,OA JH JKTSUNZ FLAG YS[KK LNL; DS LE{K XQIRK] U;KF;D LNL; ,OA JH JKTSUNZ FLAG YS[KK LNL; DS LE{K XQIRK] U;KF;D LNL; ,OA JH JKTSUNZ FLAG YS[KK LNL; DS LE{K BEFORE SHRI R.K. GUPTA JUDICIAL MEMBER AND SHRI RAJ ENDRA SINGH ACCOUNTANT MEMBER VK;DJ VIHY LA[;K /ITA NO.3741/MUM/2010 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR: - 2005-06 VIHYKFKHZ DH VKSJ LS @ APPELLANT BY SHRI VIJAY MEHTA IZR;FKHZ DH VKSJ LS @ RESPONDENT BY MS. TRIPURA SUNDARI VKNS'K@ VKNS'K@ VKNS'K@ VKNS'K@ ORDER PER RAJENDRA SINGH, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 8.3.2010 OF CIT(A) FOR THE ASSESSMENT YEARS 2005-06. THE DIS PUTES RAISED BY THE ASSESSEE IN THIS APPEAL RELATES TO TAXABILITY OF AM OUNTS RECEIVED ON TRANSFER OF PROPERTY AS BUSINESS INCOME AND INCLUSION OF SALE C ONSIDERATION IN RELATION TO TWO SHOPS RECEIVED IN KIND. A GROUND HAS ALSO BEEN RAISED BY THE ASSESSEE RAISING THE ALTERNATE PLEA THAT THE AMOUNTS MAY BE TAXED AS CAPITAL GAIN ON SLUMP SALE AS GOING CONCERN U/S 50B OF THE IT ACT. THIS GROUND WAS HOWEVER NOT PRESSED BY THE LEARNED AR AT THE TIME OF HEARIN G. WE, THEREFORE DISMISS THIS GROUND AS NOT PRESSED. M/S PRABHAKAR CORPORATION 7, UMA SMRUITI, NEW MANEKLAL ESTATE, GHATKOPAR (W), MUMBAI 400 086. CUKE@ VS. ADDL. CIT, RANGE 22(1), 4 TH FLOOR, TOWER NO. 6, VASHI RAILWAY STATION BLDG., MUMBAI 400 703. VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT LQUOKBZ DH RKJH[K @ DATE OF HEARING 3-09-2013 ?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT 13-09-2013 M/S PRABHAKAR CORPORATION - 2 - 2. WE ARE, THEREFORE, LEFT WITH ONLY TWO GROUNDS I. E. TAXABILITY OF THE SALE CONSIDERATION AS BUSINESS INCOME OR CAPITAL GAIN AN D INCLUSION OF ADDITIONAL CONSIDERATION IN RESPECT OF TWO SHOPS. 3. THE ASSESSEE FIRM WAS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF BUILDING, DEVELOPMENT OF PROPERTY, DEALING IN REAL ESTATE ETC. THE ASSESSEE HAD DECLARED LONG TERM CAPITAL GAIN ON SALE OF PROPERTY . ON EXAMINATION OF DETAILS, THE AO NOTED THAT THE ASSESSEE HAD ACQUIRED A PLOT IN THE YEAR 1985 ALONG WITH BUILDING PLAN DULY APPROVED BY THE MUNICIPAL C ORPORATION. AO NOTED THAT THE PROPERTY HAD BEEN SHOWN IN THE BOOKS OF ACCOUNT S AS STOCK IN TRADE/WORK IN PROGRESS. THE PROPERTY HAD BEEN DEVELOPED BY THE ASSESSEE AND THE COST OF IMPROVEMENT HAD BEEN ADDED TO THE COST AS WORK IN P ROGRESS. HOWEVER THE CONSTRUCTION OF THE PROJECT COULD NOT BE COMPLETED DUE TO PROLONGED LITIGATION AND THE ASSESSEE SOLD THE PROPERTY TO M/S EKTA COMB INES IN ASSESSMENT YEAR 2005-06 VIDE SALE AGREEMENT DATED 13.7.2004 FOR A T OTAL CONSIDERATION OF RS. 1.41 CRORE. IN TERMS OF THE AGREEMENT, THE PURCHASE R AGREED TO PROVIDE TWO SHOPS OF 300 SQ. FT. EACH FREE OF COST TO THE ASSES SEE IN ADDITION TO THE ABOVE SALE CONSIDERATION. THE AO ASKED THE ASSESSEE TO EX PLAIN AS TO WHY SALE CONSIDERATION SHOULD NOT BE CONSIDERED AS BUSINESS INCOME AS FROM THE VERY BEGINNING THE ASSESSEE HAD BOUGHT THE PROPERTY AND DEVELOPMENT RIGHTS WITH A CLEAR INTENTION OF DEVELOPING THE PROPERTY BY CON STRUCTING SHOPS AND FLATS AND FURTHER IMPROVEMENT HAD ALSO BEEN MADE. THE ASS ESSEE IN THE LETTER DATED 25.6.2001 AGREED THAT THE PROPERTY AND THE DE VELOPMENT RIGHTS WERE PURCHASED FOR THE PURPOSE OF BUSINESS. HOWEVER, IT WAS SUBMITTED THAT INITIAL INTENTION OF THE ASSESSEE WAS DEFEATED DUE TO UNFOR ESEEN CIRCUMSTANCES OF MUNICIPAL CORPORATION GOING TO COURT AND THE COURT RESTRAINING THE ASSESSEE FROM CREATING ANY THIRD PARTY RIGHTS ON THE INCOMPL ETE PROJECT. THE ASSESSEE HAD, THEREFORE, DECIDED TO SELL THE PROPERTY AFTER DEMOLISHING THE OLD UNFINISHED STRUCTURE, LEVELING AND FENCING OF THE P LOT. IT WAS, THEREFORE, URGED THAT THE LONG TERM CAPITAL GAIN DECLARED BY THE ASS ESSEE SHOULD BE ACCEPTED. 3.1 AO, HOWEVER DID NOT ACCEPTED THE CONTENTIONS RA ISED. IT WAS OBSERVED BY HIM THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS O F CONSTRUCTION AND DEVELOPMENT AND THE PROPERTY HAD BEEN PURCHASED WIT H THE INTENTION OF M/S PRABHAKAR CORPORATION - 3 - BUSINESS AND ADVANCES FROM INTENDING CUSTOMERS WERE ALSO TAKEN. EFFORTS WERE ALSO MADE FOR IMPROVEMENT OF THE PROPERTY AND AT THE TIME OF SALE OF THE PROPERTY IT WAS APPEARING IN THE BALANCE SHEET AS S TOCK IN TRADE AND NOT AS AN INVESTMENT. HE, THEREFORE, REJECTED THE CLAIM OF TH E ASSESSEE AFTER ASSIGNING THE FOLLOWING REASONS. 1. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF CONS TRUCTION AND DEVELOPMENT OF PROPERTIES AND THE ABOVE PLOT OF LAN D WAS ACQUIRED EXCLUSIVELY FOR THIS PURPOSE. THE ASSESSEE HAS ALSO CLAIMED EXPENSES INCURRED FOR DEVELOPMENT OF THE PROJECT UNDER THE H EAD CAPITAL WORK-IN- PROGRESS TILL THE YEAR OF SALE. 2. THE ADVANCES FROM THE INTENDING CUSTOMERS WERE A LSO ACCOUNTED IN THE BALANCE SHEET AGAINST THE PROPERTY UNDER DEVELO PMENT. 3. THE EFFORTS INCLUDING LITIGATION, WERE MADE TO C ONSTRUCT AND DEVELOP THE PROPERTY FOR SELLING IT IN THE REAL ESTATE MARK ET. 4. AT THE TIME OF DISPOSAL OF THE PROPERTY, IT WAS APPEARING IN THE BALANCE SHEET AS TOCK-IN-TRADE AND NOT AS AN INVEST MENT. 5. IT IS ALSO SEEN FROM THE RECORDS THAT THE ASSESS EE HAD RECEIVED BOOKINGS FROM THE CUSTOMERS TOWARDS SALE OF FLATS A ND ADVANCES WERE RECEIVED. THIS GOES TO INDICATE THAT THE PROPERTY U NDER DEVELOPMENT WAS NOT AN INVESTMENT BUT A STOCK-IN-TRADE. 3.2 THE ASSESSEE ALSO RAISED AN ALTERNATE PLEA THAT THE SALE OF THE PROJECT SHOULD BE TREATED AS SLUMP SALE WITHIN THE MEANING OF SECTION 2(42C) OF THE INCOME TAX ACT. THE AO HOWEVER OBSERVED THAT THE CO NTENTIONS OF SLUMP SALE WAS NOT SATISFIED AS THE ASSESSEE WAS NOT AN UNDERT AKING AND FOR THE PURPOSE OF APPLICATION OF SECTION 50B THERE SHOULD BE CAPIT AL ASSET SOLD AND NOT STOCK IN TRADE. AN AUDIT REPORT IN RESPECT OF SLUMP SALE WAS ALSO REQUIRED TO BE FILED WHICH WAS NOT DONE. AO, THEREFORE, REJECTED THE CLA IM. AS REGARDS THE SALE M/S PRABHAKAR CORPORATION - 4 - CONSIDERATION, THE AO OBSERVED THAT IN ADDITION TO MONETARY CONSIDERATION, THE ASSESSEE HAD ALSO RECEIVED TWO SHOPS, MARKET VA LUE OF WHICH HAD TO BE ADDED TO THE SALE CONSIDERATION. HE MADE LOCAL ENQU IRIES THROUGH THE WARD INSPECTOR WHO RECORDED THE STATEMENT OF PARTNER OF M/S EKTA COMBINES, WHO IN RESPONSE TO A QUESTION AS TO THE RATE ON WHICH H E WAS OFFERING THE SHOPS TO CUSTOMERS, HE REPLIED THAT THE RATE VARIED FROM 3,0 00/- TO 7,000/- PER SQ. FT. FOR GROUND FLOOR AND RS. 7,000 PER SQ. FT. ON FIRST FLOOR AND RS. 4,500/- ON SECTION FLOOR ETC. AO, THEREFORE, CALCULATED THE MA RKET VALUE A THE RATE OF RS. 7,000/- PER SQ. FT. WHICH CAME TO RS. 42,00,000. TH E TOTAL SALE CONSIDERATION WAS THUS COMPUTED AT RS. 1.83 CRORE AND LONG TERM C APITAL GAIN WAS COMPUTED AT RS. 1,38,89,079/- AFTER REDUCING THE CO ST OF ACQUISITION AND THE COST OF DEVELOPMENT. 4. THE ASSESSEE DISPUTED THE DECISION OF AO AND SUB MITTED BEFORE CIT(A) THAT THOUGH THE ASSESSEE HAD PURCHASED THE PROPERTY WITH THE INTENTION OF BUSINESS, THE INITIAL INTENTIONS OF THE ASSESSEE WE RE DEFEATED BY COURT LITIGATIONS. THERE WAS NO ACTIVITY WHATSOEVER FOR O VER 18 YEARS ON THE PROJECT. THEREFORE, ONLY BECAUSE THE PROPERTY HAD BEEN SHOWN AS STOCK IN TRADE AND WORK IN PROGRESS IN THE BOOKS OF ACCOUNTS, IT WILL NOT CHANGE THE NATURE OF ASSET FROM THE CAPITAL ASSET TO BUSINESS ASSET. IT WAS ACCORDINGLY URGED THAT THE LONG TERM CAPITAL GAIN SHOULD BE ACCEPTED. ALTE RNATIVELY, IT WAS ALSO SUBMITTED AS DONE BEFORE AO THAT CAPITAL GAIN SHOUL D BE COMPUTED U/S 50B AS SLUMP SALE. THE ASSESSEE ALSO RAISED OBJECTION T O THE COMPUTATION OF MARKET VALUE OF TWO SHOPS. IT WAS SUBMITTED THAT TH E ASSESSEE HAD NOT RECEIVED THE SHOPS EVEN TILL DATE. THERE WAS THUS N O REAL RECEIPT/INCOME IN RESPECT OF SHOPS. MOREOVER THE VALUE ADOPTED BY THE AO WAS RS. 7,000/- PER SQ. FT. ON THE DATE OF ENQUIRY WHEREAS THE VALUE SH OULD HAVE BEEN CALCULATED ON THE DATE OF TRANSACTION IN THE YEAR 2004. CIT(A) DID NOT ACCEPT THE ARGUMENTS ADVANCED BY THE ASSESSEE. IT WAS OBSERVED BY HIM THAT THE ASSESSEE HAD PURCHASED THE PROPERTY FOR THE PURPOSE OF BUSINESS AND ALSO HAD MADE FURTHER DEVELOPMENTS WHICH HAD BEEN DECLAR ED AS WORK IN PROGRESS AND THE PROPERTY HAD BEEN DESCRIBED AS STOCK IN TRA DE EVEN ON THE DATE OF SALE. THE ASSESSEE HAD NOT CONVERTED THE STOCK IN T RADE INTO INVESTMENT. CIT(A) ALSO NOTED THAT ON BEING POINTED OUT BY THE AO AS TO HOW THE INCOME M/S PRABHAKAR CORPORATION - 5 - HAD BEEN DECLARED AS CAPITAL GAIN, THE ASSESSEE IMM EDIATELY RAISED PLEA THAT IT COULD BE CONSIDERED AS SLUMP SALE U/S 50B OF THE IN COME TAX ACT WHICH SHOWS THAT THE ASSESSEE ACCEPTED IT AS BUSINESS ASS ET. AS REGARDS THE VALUE OF TWO SHOPS, CIT(A) OBSERVED THAT SAME HAD BEEN CONSI DERED AT MARKET RATE AS THE PURCHASER OF THE PROPERTY WOULD NOT SUBMIT THE FALSE STATEMENT AS IT WOULD ADVERSELY AFFECT HIM. CIT(A), THEREFORE, CONF IRMED THE ORDER OF AO, AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE TRIBUNAL. 5. BEFORE US THE LEARNED AR FOR THE ASSESSEE REITER ATED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES THAT THOUGH THE INTEN TION OF THE ASSESSEE INITIALLY WAS COMMERCIAL EXPLOITATION OF THE PROPER TY BUT THE INTENTION OF HAD CHANGED AFTER PROLONGED LITIGATION AND THE ASSESSEE HAD SOLD THE PROPERTY, INCOME FROM WHICH HAD TO BE CONSIDERED AS CAPITAL G AIN. IT WAS ALSO SUBMITTED THAT THE ENTRY IN THE BOOKS OF ACCOUNTS WAS NOT CON CLUSIVE ABOUT THE NATURE OF TRANSACTION. THE ASSESSEE PLACED RELIANCE ON THE FO LLOWING JUDGMENTS. (I) 62 ITR 578(MADRAS) IN CASE OF CIT VS. KASTURI ESTATES (P) LTD. (II) 51 ITR 829 (KERALA) INCASE OF RAMAN PILLAI VS . CIT (III) 208 ITR 232 (MUMBAI) IN CASE OF FORT PROPERTI ES LTD. V. CIT (IV) 388 ITR 293 (DELHI) IN CASE OF CIT VS. HITACHI STATES PVT. LTD. 8. IN RELATION TO THE FREE SHOPS, IT WAS SUBMITTED THAT THE ASSESSEE HAD NOT RECEIVED THE SHOPS TILL DATE AND, THEREFORE THERE WAS NO REAL INCOME AND NO INCOME HAD ACCRUED TO THE ASSESSEE. THE ASSESSEE PL ACED RELIANCE ON THE DECISION OF MUMBAI BENCH OF TRIBUNAL IN CASE OF CHE MOSYN LTD VS. ACIT (19 TRIB. 6) FOR THE SAID PROPOSITION. IT WAS ALSO SUBM ITTED THAT EVEN IF INCOME HAS ACCRUED, THE VALUE ADOPTED BY THE AO WAS AT THE CUR RENT RATE AND NOT THE RATE AT THE TIME OF AGREEMENT. IT WAS ALSO SUBMITTED THA T THE ASSESSEE HAD NOT BEEN PROVIDED WITH PROPER OPPORTUNITY IN THE MATTER OF VALUATION OF PROPERTY. THE LEARNED DR ON THE OTHER HAND STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND PLACED RELIANCE ON THE FINDIN GS GIVEN IN THE RESPECTIVE ORDERS. M/S PRABHAKAR CORPORATION - 6 - 6. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE M ATTER CAREFULLY. THE DISPUTE IS REGARDING NATURE OF INCOME FROM SALE OF PROPERTY AS WELL AS ACCRUAL OF INCOME IN RESPECT OF FREE SHOPS TO BE GIVEN TO T HE ASSESSEE AS PER THE AGREEMENT AND THE VALUE THEREOF. THE ASSESSEE WHO W AS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF BUILDING, DEVELOPMENT O F PROPERTY AND DEALING IN REAL ESTATE HAD ACQUIRED A PLOT IN THE YEAR 1985 AL ONG WITH BUILDING PLAN DULY APPROVED BY THE MUNICIPAL CORPORATION. THE PROPERTY HAD BEEN SHOWN IN THE BOOKS OF ACCOUNT AS STOCK IN TRADE. THE ASSESSEE HA D ALSO INCURRED EXPENDITURE ON DEVELOPMENT OF THE PROPERTY WHICH HA D BEEN SHOWN UNDER THE HEAD CAPITAL WORK IN PROGRESS. THE ASSESSEE HAD A LSO TAKEN ADVANCE FROM CUSTOMERS. THESE FACTS ARE NOT DISPUTED. THE ASSESS EE BEFORE THE AO AS WELL AS BEFORE THE CIT(A) ADMITTED THAT THE PROPERTY AND THE DEVELOPMENT RIGHTS HAD BEEN PURCHASED FOR THE PURPOSE OF BUSINESS. IT IS A SETTLED LEGAL POSITION THAT IT IS THE INTENTION OF THE ASSESSEE BEHIND THE TRANSACTIONS WHICH WILL DECIDE THE EXACT NATURE OF TRANSACTION. THOUGH THE ENTRY IN THE BOOKS OF ACCOUNTS IS NOT CONCLUSIVE ABOUT THE NATURE OF TRAN SACTION, BUT IT IS RELEVANT MATERIAL WHICH IN THIS CASE SUPPORTS THE INITIAL IN TENTION OF THE ASSESSEE THAT THE PROPERTY HAD BEEN ACQUIRED FOR THE PURPOSE OF B USINESS. IT IS ALSO NOT DISPUTED THAT THE ASSESSEE FIRM HAD BEEN FORMED FOR THE PURPOSE OF BUSINESS. IN CASES WHERE INTENTION OF THE ASSESSEE IS NOT CLE AR, IT HAS TO BE GATHERED FROM SURROUNDING CIRCUMSTANCES SUCH AS ENTRY IN THE BOOKS OF ACCOUNTS, OBJECTS IN THE MEMORANDUM OF ASSOCIATION, SUBSEQUEN T CONDUCT OF THE ASSESSEE IN DEALING WITH THE PROPERTY. HOWEVER, IN THE PRESENT CASE, THIS IS NOT REQUIRED AS THE INTENTION BEHIND THE PURCHASE OF TH E PROPERTY HAS ALREADY BEEN ADMITTED BY THE ASSESSEE AS BEING FOR THE PURP OSE OF BUSINESS. ONCE THE INTENTION OF THE ASSESSEE IS CLEAR AND THE PROPERTY IS ALSO RECORDED IN THE BOOKS OF ACCOUNTS AS BUSINESS ASSET, THE NATURE OF THE SAID ASSET HAS TO BE CONSIDERED AS BUSINESS UNLESS THE ASSESSEE CHANGES THE INTENTION AND CONVERTS THE BUSINESS ASSET INTO INVESTMENT. IN THI S REGARD THERE IS A CLEAR FINDING BY THE AUTHORITIES BELOW WHICH HAS NOT BEEN CONTROVERTED BEFORE US THAT THE PROPERTY REMAINED RECORDED AS STOCK IN TRA DE/ WORK IN PROGRESS EVEN AT THE TIME OF SALE. IT IS, THEREFORE, CLEAR THAT T HE ASSESSEE NEVER CHANGED THE INTENTION TO CONVERT THE STOCK IN TRADE INTO INVEST MENT. THERE WERE PROLONGED LITIGATIONS WHICH ALSO SHOW THAT THE ASSESSEE HAD B EEN TRYING HARD TO FULFILL M/S PRABHAKAR CORPORATION - 7 - THE INTENTION OF DOING THE BUSINESS WITH THE PROPE RTY. IN THESE CIRCUMSTANCES MERELY BECAUSE THE PROPERTY HAS BEEN SOLD AFTER HOL DING FOR A LONG TIME IS NOT SUFFICIENT TO HOLD THAT PURCHASE OF PROPERTY WAS AN INVESTMENT. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE, THEREF ORE, HOLD THAT PURCHASE OF PROPERTY WAS WITH THE INTENTION TO DO BUSINESS AND IT WAS AN ITEM OF STOCK IN TRADE. IT IS A SETTLED LEGAL POSITION THAT EVEN A S INGLE TRANSACTION CAN CONSTITUTE AN ADVENTURE IN NATURE OF TRADE. THE FINDINGS OF AU THORITIES BELOW IN THIS REGARD IS, THEREFORE, UPHELD. 7. THE LEARNED AR FOR THE ASSESSEE HAS PLACED RELIA NCE ON SOME JUDGMENTS AS LISTED IN PARA (5) EARLIER. HOWEVER, WE FIND, TH E SAID JUDGMENTS ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN CASE OF CIT VS. KASTOORI ESTATE PVT. LTD. (SUPRA) THE ASSES SEE HAD PURCHASED THE PROPERTY HELD FOR TEN YEARS AND SOLD IT FOR APPRECI ATION. THERE WAS NO MATERIAL TO SHOW ANY TRADING ACTIVITY. IT WAS THEREFORE HELD THAT IT WAS NOT AN ADVENTURE IN THE NATURE OF TRADE. FACTS OF THE CASE WERE DIFFERENT FROM THOSE OF THE ASSESSEE. IN CASE OF N. RAMAN PILLAI VS. CIT (S UPRA), THE ASSESSEE WHO WAS OWNER OF LAND HAD SOLD PART OF THE LAND AND BALANCE 69.5% WAS HELD FOR SELF. THERE WERE NO OTHER PURCHASES AND SALES AND THE BAL ANCE PROPERTY HELD BY HIM HAD BEEN SOLD LATER. IT WAS NOTED BY THE HIGH COURT THAT THERE WERE NO VALID CIRCUMSTANCES TO INDICATE THAT THE INTENTION OF THE ASSESSEE WAS TO PURCHASE AND RESALE FOR GAIN. IN THE PRESENT CASE THE INTENTION OF THE ASSESSEE WAS ADMITTED AND THERE WERE FACTS AND CIRC UMSTANCES TO SHOW THAT IT WAS ADVENTURE IN NATURE OF TRADE WHICH WAS NOT AVAI LABLE IN THAT CASE. IN CASE OF FORT PROPERTY PVT. LTD. VS. CIT(SUPRA) THE ASSES SEE HAD ACQUIRED THE PROPERTY AND SOLD ON APPRECIATION. THE ASSESSEE WAS NEITHER DEALING IN PROPERTY NOR HAD DONE ANY TRADING ACTIVITY. IT WAS, THEREFORE, HELD THAT MERELY BECAUSE THE PROPERTY HAD BEEN ENTERED INTO BOOKS OF ACCOUNTS AS STOCK IN TRADE WAS NOT DECISIVE TO HOLD THAT IT WAS ADVENTUR E IN THE NATURE OF TRADE. FACTS IN THE PRESENT CASE ARE DIFFERENT IN WHICH PR OPERTY HAD BEEN PURCHASED WITH THE INTENTION TO DO BUSINESS AND THE ASSESSEE NEVER CHANGED THE INTENTION AND THE PROPERTY REMAINED AS BUSINESS ASS ET. IN CASE OF HITACHI ESTATES PVT. LTD VS. CIT (SUPRA) THE ISSUE WAS NATU RE OF INCOME FROM SALE OF TENANCY RIGHT. THOUGH IT HAD BEEN SHOWN AS STOCK IN TRADE IN THE BOOKS, IT M/S PRABHAKAR CORPORATION - 8 - WAS CONSIDERED BY THE TRIBUNAL AS CAPITAL ASSET AND IT WAS HELD THAT ENTRY IN THE BOOKS OF ACCOUNTS IS NOT CONCLUSIVE. THE CASE I S TOTALLY DIFFERENT FROM THE FACTS OF THE PRESENT CASE. THE CASES CITED, THEREFO RE, DO NOT COME TO THE RESCUE OF THE ASSESSEE AND AS WE HAVE HELD EARLIER, THE IN COME IN THIS CASE HAS TO BE CONSIDERED AS BUSINESS INCOME FROM TRANSACTION WHI CH WAS ADVENTURE IN THE NATURE OF TRADE. 11. NEXT ISSUE IS REGARDING ACCRUAL OF INCOME ON AC COUNT OF TWO SHOPS MEASURING 300 SQ. FT. EACH WHICH WAS TO BE RECEIVED BY THE ASSESSEE AS PART OF CONSIDERATION AS PER THE AGREEMENT ALONG WITH CASH CONSIDERATION OF RS. 1.41 CRORE. THERE IS NO DISPUTE THAT THE ASSESSEE WAS FO LLOWING MERCANTILE SYSTEM OF ACCOUNTING AS PER WHICH INCOME ACCRUES WHEN IT B ECOMES DUE. IN TERMS OF THE AGREEMENT, A SUM OF RS. 1.41 CRORE AND TWO SHOP S HAD BECOME DUE TO THE ASSESSEE. THEREFORE, IN OUR VIEW, INCOME HAS ACCRUE D TO THE ASSESSEE ON ACCOUNT OF SHOPS. IT IS ALSO TO BE NOTED THAT THE ASSESSEE ITSELF HAS SHOWN THE INCOME OF RS. 1.41 CRORE ON ACCOUNT OF CASH TRANSAC TION AS PER THE SAME AGREEMENT AND, THEREFORE, THERE IS NO REASON TO NOT SHOW THE ACCRUAL OF INCOME ON ACCOUNT OF TWO SHOPS WHICH WERE DUE TO TH E ASSESSEE IN TERMS OF THE AGREEMENT. IT IS A SETTLED LEGAL POSITION THAT IN THE MERCANTILE SYSTEM OF ACCOUNTING, ONCE THE INCOME HAS ACCRUED THE SAME HA S TO BE ASSESSEE TO INCOME EVEN IF THE PAYMENT IS RECEIVED LATER OR NOT RECEIVED. IN CASE OF NON RECEIPT, THE ASSESSEE MAY CLAIM DEDUCTION. THE LEAR NED AR FOR THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF TRIBUNAL IN CASE OF CHEMOSYN LTD. VS. ACIT (SUPRA), BUT ON CAREFUL PERUSAL OF THE SAID OR DER, WE FIND THAT THE CASE IS DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THAT CASE THE ASSESSEE WHO OWNED TWO PLOTS HAD SOLD THE DEVELOPMENT RIGHTS IN ONE OF THE PLOTS FOR A CONSIDERATION OF RS. 16.11 C RORE AND THE BUILDER HAD AGREED TO CONSTRUCT 18,000 SQ. FT. OF CARPET AREA O N THE OTHER PLOT FREE OF COST. THEREFORE, THE VALUE OF 18,000 SQ. FT. CARPET AREA WAS PART OF THE SALE CONSIDERATION OF THE PLOT SOLD. HOWEVER IN THAT CAS E SUBSEQUENTLY THERE WAS TRIPARTITE AGREEMENT WHEREBY THE ENTIRE PROPERTY CO MPRISING BOTH THE PLOTS WAS SOLD TO A THIRD PARTY AND UNDER THE NEW AGREEME NT THE ASSESSEE RECEIVED ADDITIONAL CONSIDERATION OF RS. 13 CRORES WHICH THE ASSESSEE OFFERED FOR INCOME IN THE RELEVANT YEAR. THUS THE VALUE OF CONS TRUCTED AREA OF 18,000 SQ. M/S PRABHAKAR CORPORATION - 9 - FT. WAS INCLUDED IN THE FRESH CONSIDERATION RECEIVE D AS PER TRIPARTITE AGREEMENT. THEREFORE, IN VIEW OF THE MODIFIED AGREE MENT, VALUE OF 18,000 SQ. FT. COULD NO LONGER BE ASSESSED AS PART OF CONSIDER ATION IN THE YEAR OF SALE. THE CASE OF THE ASSESSEE IS DIFFERENT. IN THIS CASE THERE WAS NO MODIFICATION OF THE AGREEMENT AND, THEREFORE, IN TERMS OF THE ORIG INAL AGREEMENT INCOME ON ACCOUNT OF SHOPS ACCRUED TO THE ASSESSEE. 9. NEXT ISSUE IS REGARDING THE VALUE OF SHOPS TO BE INCLUDED FOR THE PURPOSE OF SALE CONSIDERATION. THE AO ON THE BASIS OF ENQUIRY MADE BY THE WARD INSPECTOR HAS TAKEN THE VALUE OF SHOPS AT THE RATE OF RS. 7,000 PER SQ. FT. ON THE BASIS OF STATEMENT OF PARTNER OF M/S EKTA CO MBINES. THE CASE OF THE ASSESSEE IS THAT STATEMENT HAD BEEN TAKEN IN THE YE AR 2007 WHEREAS THE AGREEMENT HAD BEEN ENTERED INTO IN THE YEAR 2004 AN D, THEREFORE, THE RATE OF THE YEAR 2004 HAS TO BE ADOPTED. MOREOVER, IT HAS A LSO BEEN SUBMITTED BEFORE USE THAT THE ASSESSEE HAD NOT BEEN GIVEN ANY OPPORT UNITY BEFOR ADOPTING THE RATE OF 7,000 PER SQ FT. IN OUR VIEW THIS ASPECT RE LATING TO THE MARKET VALUE OF TWO SHOPS ON DATE OF AGREEMENT REQUIRES FRESH EXAMI NATION AT THE LEVEL OF AO. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) ON THI S POINT AND RESTORE THIS ISSUE TO THE FILE OF AO FOR DECIDING THE ISSUE AFRESH AFT ER NECESSARY EXAMINATION AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESS EE. 10. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 13 -9-2013 SD/- SD/- (R.K. GUPTA) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER SKS SR. P.S, MUMBAI DATED 13.9.2013 M/S PRABHAKAR CORPORATION - 10 - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI