Asst.CIT,Range-13(1), Hyderabad V. Sri C Kalyan, Hyderabad

ITA 496/HYD/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4836 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 09-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: I RAMA RAO
• Keywords: Capital receipt
• Section: 133(6); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.496/HYD/2013 ASSESSMENT YEAR 2008-09. ACIT, RANGE-13(1), -V- SRI C. KALYAN, HYDERABAD. HYDERABAD. PAN:ACSPC2026Q (APPELLANT) (RESPONDENT) C.O. NO.30/HYD/2013 (IN ITA NO.496/HYD/13 A. YR.2008-09) SRI C. KALYAN, ACIT, RANGE-13(1) HYDERABAD. V- HYDERABAD PAN:ACSPC2026Q (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI P.SOMA SEKHAR REDDY ASSESSEE BY : SHRI I. RAMA RAO DATE OF HEARING : 18-7-2013 DATE OF PRONOUNCEMENT: 21 -8-2013 ORDER PER SAKTIJIT DEY, J.M: THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTIO N FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE C IT (A)-II, HYDERABAD DATED 29-1-2013 PERTAINING TO THE ASSESSM ENT YEAR 2008-09. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS BEFORE US:- 2 ITA NO. 496 AND CO30 OF 2013 SRI C. KALYAN, HYDERABAD. 1. THE ORDER OF THE CIT (A) IS ERRONEOUS IN LAW AND FACTS OF THE CASE. II) THE LD CIT (A) ERRED IN DELETING THE ADDITION M ADE TOWARDS ADVANCE AMOUNT OF RS.7,00,000/- IN THE GIVE N FACTUAL POSITION. III) THE CIT (A) ERRED IN DIRECTING TO CONSIDER THE ADDITION FOR THE ASST. YR. 2010-11, THE YEAR IN WHICH THE NO TICE FOR FORFEITURE OF DEPOSIT WAS ISSUED. IV) ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 3 . BRIEF FACTS OF THE CASE ARE, THE ASSESSEE IS AN I NDIVIDUAL DERIVING INCOME FROM THE PRODUCTION AND SALE OF FEA TURE FILMS. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE AS SESSEE HAS FILED A RETURN OF INCOME ON 31-3-2009 DECLARING A T OTAL INCOME OF RS.5,89,780/-. IN COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE HA D SHOWN AN AMOUNT OF RS. 7 CRORES AS UNSECURED LOAN FROM BERGG RUEN HOLDINGS (NANAKRAM DEVELOPMENT) CALLED UPON THE ASS ESSEE TO FURNISH THE COPY OF THE AGREEMENT AND OTHER DETAILS REGARDING THE TRANSACTION. THE ASSESSING OFFICER AFTER EXAMINING THE DEVELOPMENT AGREEMENT BETWEEN THE ASSESSEE AND THE DEVELOPER BERGGRUEN ESTATE PROJECTS PVT. LTD., NOTED THAT THE DEVELOPER HAD DEPOSITED A SUM OF RS. 7 CRORES BY PAY ORDER NO.259 9 DATED 23- 1-2008 AS INTEREST FREE REFUNDABLE SECURITY DEPOSIT . HE FURHER NOTED THAT THE MAIN PURPOSE OF THE AGREEMENT WAS TH AT THE DEVELOPER SHOULD COMPLETE A COMMERCIAL COMPLEX CONS TRUCTED OVER AC.2.24 GUNTAS OF LAND BELONGINGS TO THE ASSES SEE AND FOUR OTHER OWNERS REPRESENTED BY THE ASSESSEE HOLDING GPA ON THEIR BEHALF AND ALLOT 45% OF THE SUPER BUILT AREA TO THE ASSESSEE AND 3 ITA NO. 496 AND CO30 OF 2013 SRI C. KALYAN, HYDERABAD. OTHER CO-OWNERS. THE ASSESSING OFFICER THEREFORE AS KED THE ASSESSEE TO SHOW CAUSE AS TO WHY CAPITAL GAINS SHOU LD NOT BE TAXED ARISING OUT OF THE ENTIRE TRANSACTION OF RS.7 CRORES ON GIVING POSSESSION TO THE DEVELOPER IN VIEW OF THE P ROVISIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT R.W.S. 2(47)(V) OF THE I.T. ACT. IN RESPONSE, THE ASSESSEE SUBMITTED THAT THERE ARE FOUR ESSENTIAL INGREDIENTS OF SECTION 53A OF THE T.P. AC T, WHICH ARE (I) CONTRACT TO TRANSFER OF AN IMMOVABLE PROPERTY (II) CERTAINTY OR THE TERMS OF THE CONTRACT, (III) TRANSFEREES POSSESSION OF THE PROPERTY IN PART PERFORMANCE OF THE CONTRACT AND (IV) TRANSF EREES WILLINGNESS TO PERFORM HIS PART OF THE CONTRACT. I T WAS CONTENDED THAT SINCE IN THE ASSESSEES CASE NONE OF THE FOUR CONDITIONS WAS SATISFIED ESPECIALLY THE LAST ONE AS THE DEVELOPER HAS ALREADY EXPRESSED HIS INTENTION TO BACK OUT OF THE AGREEMEN T. IT WAS FURTHER CONTENDED THAT THE DEVELOPER HAS ALSO ISSUE D A COUNTER CLAIM DATED 2-6-10 CLAIMING REFUND OF RS.7 CRORES A LONG WITH INTEREST AT THE RATE OF 18% PER ANNUM AND QUESTIONE D THE RIGHT OF THE ASSESSEE TO FORFEIT THE DEPOSIT AND ALSO CLAIME D DAMAGES OF RS.4 CORES. 4. THE ASSESSING OFFICER THOUGH HELD THAT THE PR OVISIONS OF SECTION 53A OF T .P. ACT MAY NOT BE APPLICABLE BUT SINCE AS PER THE LEGAL NOTICE DATED 18-2-2010 THE ASSESSEE HAS F ORFEITED SECURITY DEPOSIT OF RS.7 CORES HE WAS NOT FOUND TO RETURN THE SAME TO THE DEVELOPER ANY LONGER, THE SAME AMOUNTS TO CESSATION OF LIABILITY AND THEREFORE THE SAME CONST ITUTES THE INCOME OF THE ASSESSEE AND ACCORDINGLY ADDED THE AM OUNT OF RS.7 CRORES TO THE INCOME THE ASSESSEE. THE ASSESSEE BE ING AGGRIEVED OF THE ASSESSMENT ORDER SO PASSED PREFERRED AN APPE AL BEFORE THE CIT (A). 4 ITA NO. 496 AND CO30 OF 2013 SRI C. KALYAN, HYDERABAD. 5. IN COURSE OF HEARING OF APPEAL BEFORE THE CIT (A ), THE ASSESSEE CONTENDED THAT THE LIABILITY HAS NOT FINAL LY CEASED AND IT IS ONLY A MERE CLAIM MADE BY THE ASSESSEE BUT NOT A DMITTED BY THE OTHER PARTY. IT WAS CONTENDED THAT IN ANY EVENT IT IS NOT A CESSATION OF TRADING LIABILITY RESULTING IN TAXAB LE INCOME. IT WAS FURTHER ARGUED THAT EVEN PRESUMING THAT THERE IS CE SSATION OF LIABILITY IT IS ONLY A CAPITAL RECEIPT NOT LIABLE T O TAX BECAUSE THERE WAS NEITHER TRANSFER OF ANY ASSET NOR ANY COST OF A CQUISITION. IT WAS FURTHER SUBMITTED THAT EVEN ASSUMING THAT THE T RANSACTION HAS RESULTED IN A TAXABLE EVENT, SUCH EVENT HAS NOT TAKEN PLACE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THEREFORE BY NO STRETCH OF IMAGINATI ON, THE AMOUNT CAN BE BROUGHT TO TAX IN THE IMPUGNED ASSESSMENT YE AR. IT WAS FURTHER SUBMITTED BEFORE THE FIRST APPELLATE AUTHOR ITY WHILE FRAMING THE ASSESSMENT; THE ASSESSING OFFICER CANNO T PICK AND CHOOSE THE EVIDENCE BY RELYING UPON HE LEGAL NOTICE TO BRING AN AMOUNT WHICH IS NOT LIABLE TO TAX WHILE CONVENIENT LY IGNORING THE LEGAL NOTICE OF THE OTHER PARTY WHEREIN A CLAIM WAS MADE THAT THE SECURITY DEPOSIT AMOUNT CANNOT BE FORFEITED AND A COUNTER CLAIM HAS BEEN MADE OF RS.11 CRORES AT 18% PER ANNU M. 6. THE ASSESSEE FURTHER CONTENDED THAT ONLY ON THE BASIS OF THE LEGAL NOTICE ISSUED BY THE ASSESSES THE ASSESSI NG OFFICER HAS BROUGHT TO TAX THE SECURITY DEPOSIT OF RS.7 CRORES BY HOLDING THAT THE ASSESSEE HAD FORFEITED SECURITY DEPOSIT AND TRE ATED IT AS INCOME. IT WAS CONTENDED BY THE ASSESSEE THAT AN I NCOME CAN BE BROUGHT TO TAX WHICH HAS ACCRUED OR RECEIVED DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR AND WHEN THE L EGAL NOTICE DT. 18-2-2010 ISSUED BY THE ASSESSEE WAS THE SOLE BASIS, THE TAXABILITY OR OTHERWISE OF IT CAN ONLY BE CONSIDERE D IN THE ASSESSMENT YEAR 2010-11 AND NOT BEFORE. IT WAS FU RTHER 5 ITA NO. 496 AND CO30 OF 2013 SRI C. KALYAN, HYDERABAD. CONTENDED THAT THERE WAS NO EXPRESS RIGHT GIVEN TO THE ASSESSEE TO FORFEIT UNDER ANY CIRCUMSTANCES AND INCOME CAN B E HELD TO ACCRUE ONLY WHEN THE ASSESSEE ACQUIRES A RIGHT TO RECEIVE THAT INCOME AND THE MERE RAISING OF A CLAIM OR A BILL DO ES NOT BY ITSELF CREATE ANY LEGALLY ENFORCEABLE RIGHT TO RECEIVE ANY INCOME. IT WAS FURTHER SUBMITTED THAT IN ANY EVENT THE CLAIM OF TH E ASSESSEE HAS NOT BEEN ACCEPTED BY THE OTHER PARTY AND THE ISSUE IS UNDER CHALLENGE AND THE MATTER HAS BEEN REFERRED TO ARBIT RATION IN TERMS OF CLAUSE 26 OF THE AGREEMENT AND AS SUCH THE ISSUE HAS NOT ATTAINED FINALITY AND THEREFORE THE QUESTION OF TAX ING DOES NOT ARISE AT ALL IN THE ASSESSMENT YEAR UNDER DISPUTE. THE ASSESSEE ALSO FLED WRITTEN SUBMISSIONS IN THIS REGARD. THE CIT (A) CALLED UPON THE ASSESSING OFFICER TO SUBMIT ITS COMMENTS ON THE SUBMISSIONS MADE BY THE ASSESSEE. 7. THE ASSESSING OFFICER IN HIS REPORT DATED 26-10- 2012 SUBMITTED THAT NOTICE U/S 133(6) WAS ISSUED TO THE DEVELOPER AND IN RESPONSE TO THE SAID NOTICE INFORMATION WAS SUBMITTED. IT WAS FURTHER STATED BY THE ASSESSING OFFICER THAT TH E ASSESSEE WAS PAID THE ADVANCE AMOUNT AS ON THE DATE AND THE AMOU NT WAS UTILISED FOR THE BUSINESS PURPOSES OF THE ASSESSEE. SINCE THE ASSESSING OFFICER HAD NOT EXPRESSED ANY OPINION ON THE INFORMATION SUBMITTED BY THE DEVELOPER BERGGRUEN E STATE PROJECTS PVT. LTD., THE CIT (A) ON EXAMINING THOSE INFORMATION NOTICED THAT THE SAID COMPANY HAS CONFIRMED THAT TH EY HAVE ENTERED INTO JOINT DEVELOPMENT AGREEMENT ON 24-1-20 08 WITH THE ASSESSEE FOR THE DEVELOPMENT OF THE PROPERTY ADMEAS URING AC.2.24 GUNTAS LOCATED IN SURVEY NOS. 83,84, AND 87 OF NANAKRAMGUDA VILLAGE, SERILLINGAMPALLY, R.R. DISTRI CT. AS PER THE JOINT DEVELOPMENT AGREEMENT, THE SAID DEVELOPER HA D DEPOSITED AN AMOUNT OF RS.7 CRORES AS INTEREST FREE REFUNDABL E SECURITY 6 ITA NO. 496 AND CO30 OF 2013 SRI C. KALYAN, HYDERABAD. DEPOSIT WITH THE ASSESSEE AND THERE IS NO MENTION IN THE JOINT DEVELOPMENT AGREEMENT THAT THE SECURITY SHALL BE F ORFEITED UNDER ANY CIRCUMSTANCES. IT WAS FURTHER NOTICED BY THE C IT (A) THAT AN AMOUNT OF RS.7 CRORES GIVEN TO THE ASSESSEE WAS SHO WN AS LOAN AND ADVANCE IN THE BOOKS OF ACCOUNTS OF THE DEVELO PER. THE ASSESSMENT PARTICULARS OF THE DEVELOPER WERE ALSO S UBMITTED IN THE CONTEXT. 8. THE CIT (A) ON EXAMINING THE BALANCE-SHEET FILE D FOR THE ASSESSMENT YEAR 2008-09 TO 2010-11 NOTICED THAT THE AMOUNT OF RS.7 CRORES HAS BEEN SHOWN UNDER CURRENT ASSETS, LO ANS AND ADVANCES AND ADVANCES FOR JOINT DEVELOPMENT OF THE LAND. EVEN IN THE NOTES TO THE ACCOUNTS, IT WAS STATED THAT TH E ADVANCES FOR JOINT DEVELOPMENT REPRESENT AMOUNT PAID AS REFUNDAB LE ADVANCES TO OWNERS OF THE PROPERTY IN HYDERABAD FOR JOINT DE VELOPMENT OF A COMMERCIAL PROPERTY. FROM THE INFORMATION FURNISHE D BY THE DEVELOPER, THE CIT (A) CAME TO A CONCLUSION THAT T HE PROJECT HAS NOT TAKEN UP AND THE AMOUNT OF RS.7 CRORES HAS BEEN REFLECTED AS ADVANCE IN THE BOOKS OF THE DEVELOPER. THE CIT (A) ALSO TOOK COGNISANCE OF THE FACT THAT IN RESPONSE TO THE LEGA L NOTICE ISSUED BY THE ASSESSEE TO THE DEVELOPER FORFEITING THE SEC URITY DEPOSIT OF RS.7 CRORES, THE DEVELOPER HAS ALSO SENT A LEGAL N OTICE WITH COUNTER CLAIM OF RS.11 CRORES ALONG WITH INTEREST A T 18%. SHE FURTHER TOOK NOTE OF THE FACT THAT THE DEVELOPER HA S APPROACHED FOR ARBITRATION UNDER CLAUSE-26 OF THE JOINT DEVELO PMENT AGREEMENT AND AS PER THE PROCEEDINGS BEFORE THE ARB ITRATION TRIBUNAL COMPRISING OF MR. JUSTICE (DR.) A.S. ANAN D (RETIRED), MR. JUSTICE B.P. JEEVAN REDDY (RETIRED) AND MR. JUSTICE DORAISWAMY RAJU (RETIRED), IT IS NOTED THAT THE ARBITRATION PR OCEEDINGS TOOK PLACE IN 8 SITTINGS AND FURTHER PROCEEDINGS WAS SCH EDULED FOR 18- 2-2013 AT 10.30 AM AT HYDERABAD. AS PER 2 ND SITTING, THE HONBLE 7 ITA NO. 496 AND CO30 OF 2013 SRI C. KALYAN, HYDERABAD. ARBITRAL TRIBUNAL HAS RECORDED THE ISSUES TO BE SE TTLED WHICH HAVE BEEN ELABORATELY MENTIONED IN PARA 7.1 OF THE CIT (A)S ORDER. AFTER CONSIDERING THESE FACTS, THE CIT (A) CAME TO A CONCLUSION AS UNDER:- IT MAY BE NOTED THAT THE JOINT DEVELOPMENT AGREEM ENT WAS ENTERED INTO WITH THE SHARING RATIO OF 45:55 BE TWEEN OWNERS AND THE DEVELOPER SUBJECT TO SPECIFIC PERFO RMANCE BY BOTH THE PARTIES WHICH ARE ENUMERATED IN THE AGR EEMENT ITSELF. AS SEEN FROM THE LEGAL NOTICES BY BOTH THE PARTIES, THERE HAS BEEN NO COMPLIANCE WITH THE TERMS OF THE AGREEMENT. THERE WERE CHARGES AND COUNTER CHARGES BY BOTH THE PARTIES. IT IS AN ADM ITTED FACT THAT THE YEAR UNDER CONSIDERATION IS THE YEAR IN WHICH DEVELOPMENT AGRE EMENT HAS BEEN ENTERED INTO AND THERE IS NO QUESTION OF F ORFEITURE OF THE AMOUNT IN THIS YEAR. HENCE, I AGREE WITH TH E APPELLANTS CONTENTION THAT EVEN IF THE AMOUNT IN Q UESTION IS CONSIDERED AS CESSATION OF LIABILITY, THE EVENT OCCURRED ONLY WHEN THE APPELLANT ISSUED LEGAL NOTICE DTD. 18 -2-2010 AND TAXABILITY OR OTHERWISE OF IT CAN BE CONSIDERED ONLY IN THE ASSESSMENT YEAR 2010-11 AND NOT DURING THE YEAR UNDER CONSIDERATION. THEREFORE, THE ADDITION OF RS .7 CRORES MADE IN THIS YEAR IS ORDERED TO BE DELETED. HOWEVE R, THE ASSESSING OFFICER IS DIRECTED TO CONSIDER THIS ISSU E IN THE ASSESSMENT FOR ASST. YEAR 2010-11, AND TAKE ACTION ACCORDINGLY, AS PER LAW. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D BEFORE US THAT THE ASSESSEE HAVING FORFEITED THE SECURITY DEPOSIT OF RS.7 CRORES AND UTILISED IT FOR THE PURPOSE OF HIS BUSIN ESS, IT HAS TO BE TREATED AS RECEIPT IN HIS HANDS IN THE IMPUGNED ASS ESSMENT YEAR. 8 ITA NO. 496 AND CO30 OF 2013 SRI C. KALYAN, HYDERABAD. 10. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE A SSESSEE, ON THE OTHER HAND, SUBMITTED THAT THE ISSUE OF FORFEIT URE OF SECURITY DEPOSIT AMOUNT IS SUBJECT MATTER OF ARBITRATION PRO CEEDINGS AND BY NO STRETCH OF IMAGINATION, IT CAN BE SAID THAT T HE INCOME TO THE TUNE OF RS.7 CRORES ACCRUED TO THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR AS THERE WAS NEITHER FORFEITURE OF SECURITY DEPOSIT NOR THERE WAS ANY ACCRUED RIGHT TO FORFEIT THE DEPOSIT. MERE RAISING A CLAIM IPSO FACTO DOES NOT CREATE LEG ALLY ENFORCEABLE RIGHT TO RECEIVE ANY INCOME. IN THIS CONTEXT, THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE RELIED U PON THE FOLLOWING DECISIONS:- (1) CIT VS. BHARAT PETROLEUM CORPORATION LTD. (202 ITR 492) (CAL) (2) CIT VS. HINDUSTAN HOUSING & LAND DEVELOPMENT TR UST LTD. (161 ITR 524 (SC) (3) CIT VS. HERCULES TRADING CORPORATION (143 ITR 5 04 (CAL). (4) CIT VS. PALAKOL CO-OP. AGRICULTURAL & INDUSTRIA L SOCIETY (171 ITR 607)(AP) (5) BPR CONSTRUCTIONS VS. CIT (192 ITR 534) @537) ORISSA) (6) CIT VS. REHMAT KHAN (213 ITR 134 (RAJASTHAN) 11. IT WAS FURTHER SUBMITTED THAT THE ISSUE OF REF UND SECURITY OF DEPOSIT AMOUNTING TO RS. 7 CRORES IS SUBJECT MATTER OF ARBITRATION PROCEEDINGS AND HAS NOT YET ATTAINED FINALITY. HE NCE, THE ISSUE OF FORFEITURE OF SECURITY DEPOSIT IS STILL NOT DECI DED AND THEREFORE THERE IS NO VESTED RIGHT AND NO RIGHT IS ACQUIRED BY VIRTUE OF DEVELOPMENT AGREEMENT TO FORFEIT THE SECURITY DEPOS IT. IN THE EVENT THE ARBITRATION TRIBUNAL DECIDES THAT THE ASS ESSEE HAS NO 9 ITA NO. 496 AND CO30 OF 2013 SRI C. KALYAN, HYDERABAD. RIGHT OF FORFEITURE OF SECURITY DEPOSIT, THE ASSESS EE IS OBLIGED TO RETURN THE SECURITY DEPOSIT ALONG WITH THE DAMAGES CLAIMED BY THE DEVELOPER. IT WAS SUBMITTED THAT IN FACT BEFO RE THE ARBITRATION TRIBUNAL IT IS THE CLAIM OF DEVELOPER T HAT NO RIGHT OF FORFEITURE OF SECURITY DEPOSIT IS CONFERRED ON THE ASSESSEE UNDER THE TERMS OF DEVELOPMENT AGREEMENT. IN THESE CIRCUM STANCES, WHEN THE PROCEEDINGS IS STILL CONTINUING IT CANNOT BE SAID THAT THE INCOME HAD ACCRUED TO THE ASSESSEE. IN SUPPORT OF SUCH CONTENTION, IT WAS SUBMITTED THAT THE CIT (A) HAD R IGHTLY DELETED THE ADDITION OF RS.7 CRORES. IN THIS CONTEXT, THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE HAD RELI ED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF E.D. SASSOON & CO. LTD. VS. CIT (26 ITR 27), DECISION OF A.P. HIGH COURT IN KHAN BAHADUR AHMED ALLADIN AND SONS VS. CIT (1969) 74 IT R 651, IN CASE OF CIT VS. PALAKOL CO-OP. AGRICULTURAL AND IND USTRIAL SOCIETY REPORTED IN 171 ITR 607. THE LEARNED AUTHORISED RE PRESENTATIVE FOR THE ASSESSEE ALSO RELIED UPON THE DECISION OF I NCOME-TAX APPELLATE TRIBUNAL, CHENNAI BENCH IN CASE OF ACIT VS. TRIDENT TEXTILE MILLS LTD. IN ITA NO.1169/MDS/2012 DATED 1 76-12-2012. 12. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL ON RECORD. WE HAVE ALSO CAREFULLY APPLIED OUR MIND TO THE DECISION PLACED BEFORE US. ON PERUSAL OF THE O RDER OF THE CIT (A) , WE ARE OF THE VIEW THAT THE CIT (A) HAS ELABO RATELY DISCUSSED THE FACT FROM WHICH IT CAN BE INFERRED TH AT THE FORFEITURE OF SECURITY DEPOSIT OF RS.7 CRORES IS STILL UNDER L ITIGATION BEFORE ARBITRATION TRIBUNAL AND FINAL DECISION IS YET TO BE TAKEN IN THE MATTER. AS PER THE FRAMING OF ISSUES TO BE SETTLE D BY THE ARBITRATION TRIBUNAL, IT IS QUITE EVIDENT THAT IT I NVOLVES THE ENTIRE GAMUT OF THE ASSESSEES RIGHT TO FORFEIT THE SECU RITY DEPOSIT AND WHETHER SUCH FORFEITURE I AFTER FULFILLING THE COND ITIONS PRECEDENT 10 ITA NO. 496 AND CO30 OF 2013 SRI C. KALYAN, HYDERABAD. AS SET OUT IN THE JOINT DEVELOPMENT AGREEMENT. THE ISSUES FOR SETTLEMENT BEFORE THE ARBITRATION TRIBUNAL ALSO REV EAL THAT THE COUNTER CLAIM MADE BY THE DEVELOPER FOR AN AMOUNT O F RS.11 CRORES AND INTEREST THEREON AT 18% IS ALSO ONE OF T HE ISSUES TO BE SETTLED BY THE ARBITRATION TRIBUNAL. IN THESE CIRC UMSTANCES, IT CANNOT BE SAID THAT THERE IS REMISSION/CESSATION OF LIABILITY WITH REGARD TO THE AMOUNT OF RS.7 CRORES ADVANCED TO THE ASSESSEE AS SECURITY DEPOSIT SO AS TO RESULT IN ACCRUAL OF INC OME FOR THE IMPUGNED ASSESSMENT YEAR. IT IS ALSO A FACT ON REC ORD THAT THE FORFEITURE OF THE AMOUNT OF RS.7 CRORES WAS MADE ON THE BASIS OF LEGAL NOTICE DATED 18-2-2010 WHICH IS AN EVENT HAP PENING SUBSEQUENT TO THE ASSESSMENT YEAR UNDER DISPUTE. HE NCE, EVEN IF IT IS TO BE ASSUMED THAT THE AMOUNT OF RS.7 CRORES AS A REVENUE RECEIPT IN THE HANDS OF THE ASSESSEE CERTAINLY IT C ANNOT BE HELD TO BE ACCRUING TO THE ASSESSEE DURING THE IMPUGNED ASS ESSMENT YEAR. IN THE AFORESAID CIRCUMSTANCES, THE CONCLUSI ON ARRIVED AT BY THE CIT (A) WHILE HOLDING THAT THE AMOUNT OF RS. 7 CRORES CANNOT BE TREATED AS INCOME FOR THE IMPUGNED ASSESS MENT YEAR, STANDS TO REASON AND DO NOT CALL FOR ANY INTERFEREN CE FROM US. WE ACCORDINGLY UPHOLD THE SAME AND DISMISS THE GROUND RAISED BY THE DEPARTMENT. 13. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT STANDS DISMISSED. C.O. NO.30/HYD/2013 :- 14. IN THIS CROSS OBJECTION, THE ASSESSEE HAS RAISE D TWO ISSUES WHICH ARE AS UNDER:- (I) THE CIT (A) SHOULD HAVE GIVEN A FINDING WITH REGARD TO THE NATURE OF THE SECURITY DEPOSIT FORFEITED I.E . WHETHER IT IS CAPITAL IN NATURE AS THERE WAS NO 11 ITA NO. 496 AND CO30 OF 2013 SRI C. KALYAN, HYDERABAD. TRANSFER OF PROPERTY AS ENVISAGED U/S 2(47) OF THE ACT. (II) THE CIT (A) HAS EXCEEDED JURISDICTION BY DIRECTING THE ASSESSING OFFICER TO CONSIDER THE TAXABILITY OR OTHERWISE OF ALLEGED FORFEITURE OF DEPOSIT FOR THE ASSESSMENT YEAR 2010-11. 15. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PART IES IN RESPECT OF THE AFORESAID TWO ISSUES. ON PERUSAL OF THE ORDER OF THE CIT (A), IT IS TO BE SEEN THAT THE CIT (A) HAS CATEGORICALLY HELD THAT THE AMOUNT OF RS.7 CRORES IS NOT TAXABLE AS INCOME DURING THE IMPUGNED ASSESSMENT YEAR. HENCE, IT BEC OMES IRRELEVANT AND ABSOLUTELY UNNECESSARY TO DECIDE TH E EXACT CHARACTER OR NATURE OF THE RECEIPT, WHEN IT IS HELD TO BE NOT TAXABLE. SIMILARLY, ON PERUSAL OF THE FINDING OF THE CIT (A), IT IS SEEN THAT THE CIT (A) HAS NOT DIRECTED THE ASSESSIN G OFFICER TO ASSESS THE SECURITY DEPOSIT FORFEITED IN THE ASSES SMENT YEAR 2010-11 BUT ONLY TO EXAMINE THE TAXABILITY OF HE SA ME. FROM THIS IT IS VERY MUCH CLEAR THAT THE CIT (A) HAS LEFT THE TAXABILITY OR OTHERWISE OF THE AMOUNT OF RS.7 CRORES OPEN FOR DEC ISION AND HAS NOT CLOSED THE ISSUE. IF AT ALL THE ASSESSING OFFI CER INTENDS TO CONSIDER THE SECURITY DEPOSIT FORFEITED AS AN INCOM E OF THE ASSESSEE IN THE ASSESSMENT YEAR 2010-11, THEN IT WI LL BE OPEN FOR THE ASSESSEE TO PUT FORWARD ITS CASE WITH REGARD TO THE NATURE OF THE RECEIPT AS TO WHETHER IT IS CAPITAL OR NOT. FUR THERMORE, WHEN THE ENTIRE ISSUE OF FORFEITURE IS THE SUBJECT MATTE R OF ARBITRAL PROCEEDINGS AND HAS NOT ATTAINED FINALITY, IT WOULD NOT BE APPROPRIATE TO FORECLOSE HE ISSUE BY TAKING A DECIS ION EITHER WAY WITH REGARD TO THE NATURE OF RECEIPT OR TAXABILITY OF THE SAME IN A PARTICULAR ASSESSMENT YEAR. IT IS ALSO TO BE SEEN FROM THE ORDER PASSED BY THE CIT (A) THAT THE ASSESSEE HIMSELF HAS ARGUED 12 ITA NO. 496 AND CO30 OF 2013 SRI C. KALYAN, HYDERABAD. BEFORE THE CIT (A) IN COURSE OF APPELLATE PROCEEDIN GS THAT THE TAXABILITY OR OTHERWISE OF IT SHOULD BE CONSIDERED ONLY IN THE ASSESSMENT YEAR 2010-11 AND NOT BEFORE THAT. IN VI EW OF SUCH FACT, THE CONTENTIONS RAISED BY THE ASSESSEE IN CRO SS OBJECTION ARE NOT TENABLE. IN AFORESAID VIEW OF THE MATTER, WE DISMISS THE GROUNDS RAISED BY THE ASSESSEE IN CROSS OBJECTION. 16. IN THE RESULT, BOTH THE APPEAL FILED BY THE REV ENUE AS WELL AS CROSS OBJECTION STAND DISMISSED. ORDER PRONOUNCED IN THE COURT ON 21-8-2013. SD/- ( CHANDRA POOJARI) ACCOUNTANT MEMBER SD/- (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 21 ST AUGUST, 2013 COPY TO:- 1) SRI C. KALYAN, PLOT NO.31B, HOUSE NO.G-1, ROAD N O.5, JUBILEE HILLS, HYDERABAD. 2) ACIT, CIRCLE-13(1), 2 ND FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 3) CIT (A)II, HYDERABAD. 3)CIT , HYDERABAD. 5.THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERA BAD. JMR*