SUN ENTERPRISES, MUMBAI V. ITO 14(3)(4), MUMBAI

ITA 4987/MUM/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5684 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 01-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: VALLABHDAS D PARMAR
• Keywords: Capital asset; Business income; Business expenditure; Proportionate interest; Competent authority; Surrender of tenancy right

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER , AND SHRI RAMLAL NEGI, JUDICIAL MEMBER ./ I.T.A. NO. 4987 /MUM/201 4 ( / ASSESSMENT YEAR: 20 10 - 11 ) M/S. SUN ENTERPRISE 2 88, 3 RD FLOOR, KALBADEVI ROAD, KALBADEVI, MUMBAI - 400 0 0 0. / VS. INCOME TAX OFFICER - 14(3)(4) ROOM NO.608, 6 TH FLOOR EARNEST HOUSE, NARIMAN POINT MUMBAI - 400 0 21 . ./ PAN : AACCS 2167 F ( / APPELLANT ) .. ( / RESPON DENT ) / APPELLANT BY : SHRI VALLABHDAS D.PARMAR / RESPONDENT BY : SHRI V. JUSTIN - DR / DATE OF HEARING : 2 3 /04/2018 / DATE OF PRONOUNCE MENT : 16 /07 /2018 / O R D E R PER SHAMIM YAHYA, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS) DATED 01/05/2014 AND PERTAINS TO ASSESSMENT YEAR 2010 - 11. THE GROUNDS O F APPEAL READ AS UNDER : - BEING AGGRIEVED BY THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) - 25, MUMBAI (HEREINAFTER REFERRED TO AS LEARNED CIT (A)) DATED 01.05.2014 UNDER SECTION 250 OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED AS 'IT ACT ), THE APPELLANT SUBMITS THIS APPEAL ON THE FOLLOWING GROUNDS EACH OF WHICH MAY PLEASE BE CONSIDERED WITHOUT PREJUDICE TO ONE ANOTHER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW: - 1. INCOME FROM HOUSE PROPERTY THE LEARNED CIT (A) ERRED IN CONSIDERIN G THE RENTAL INCOME UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY. . 1.2 THE LEARNED CIT (A) FAILED TO APPRECIATE THAT THE RENT WAS EARNED FROM V PERSONS LIVING ON THE LAND WHICH HAS BEEN USED BY THE APPELLANT FOR ITS BUSINESS PURPOSES. 1.3 THE LEAR NED CIT (A) FAILED TO APPRECIATE THAT RENTAL INCOME FROM PROPERTY WHICH IS MAINLY 'LAND ALONG WITH SOME DILAPIDATED BUILDINGS''CANNOT BE TAXABLE UNDER THE HEAD OF INCOME FROM HOUSE PROPERTY. 1.4 WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT (A) FAIL ED TO APPRECIATE THAT THE APPELLANT IS ENTITLED TO DEDUCTION OF MUNICIPAL TAXES OF RS. 4,648 FROM ITS GROSS ANNUAL VALUE AND INTEREST EXPENDITURE U/S 24(B) IN RESPECT OF BORROWINGS FOR ACQUISITION OF ITA NO. 4987 /MUM/201 4 M/S. SUN ENTERPRISES 2 PROPERTY, INCOME OF WHICH IS CHARGEABLE TO TAX UNDER THE HEAD OF INCOME FROM HOUSE PROPERTY. 2. INCOME FROM ASSIGNMENT OF DEVELOPMENT RIGHTS OF CHAUDHARY PLOT AT THANE: 2.1 THE LEARNED CIT (A) ERRED IN CONSIDERING THE MONETARY CONSIDERATION OF RS. 25,00,000 AND NON - MONETARY CONSIDERATION OF 10,500 S ALEABLE BUILT UP AREA ( VALUED AT RS. 2,62,50,000) FROM ASSIGNMENT OF DEVELOPMENT RIGHTS OF CHAUDHARY PLOT NET OF EXPENSES INCURRED IN RELATION TO THE SAME AS INCOME FOR THE FINANCIAL YEAR 2009 - 10. 2.2. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT (A) A LSO ERRED IN CONSIDERING THE TOTAL CONSIDERATION FROM ASSIGNMENT OF DEVELOPMENT RIGHTS OF CHAUDHARY PLOT AT RS. 2,87,50,000 (MONETARY CONSIDERATION OF RS. 25,00,000 AND NON - MONETARY CONSIDERATION OF 10,500 SALEABLE BUILT UP AREA AT RS. 2500 PER FEET OF RS. 2 , 2,50,000), AS AGAINST STAMP DUTY VALUATION OF RS. 1,64,09,000. 3.GENERAL 3.1. THE APPELLANT CRAVES LEAVE TO ADD, DELETE, WITHDRAW AND OR MODIFY ANY ONE/MORE OR ALL THE ABOVE GROUNDS OF APPEAL. 2. A PROPOS GROUND NO 1 : B RIEF FACTS OF THE CASE ARE THAT T HE AO OBSERVED THAT THE ASSESSEE HAD RECEIVED RENT INCOME FROM DATAR BLOCK AGGREGATING TO RS.1.67.613/ - WHICH WAS CREDITED TO THE CONSTRUCTION ACCOUNT. ON BEING ASKED AS TO WHY THE RENT INCOME SHOULD NOT BE ASSESSED UNDER THE HEAD 'INCOME FROM HOUSE PROPER TY , THE ASSESSEE SUBMITTED THAT THE RENTAL INCOME RECEIVED FROM DATAR BLOCK WAS TOWARDS TENANCY CHARGES RECEIVED FROM TENANTS IN THE COU RSE OF BUSINESS OF THE ASSESSEE AS A BUILDER AND DEVELOPER. THE ASSESSEE SUBMITTED THAT THESE INCOMES AND EXPENSES BEIN G INCIDENTAL TO THE BUSINESS, THE SAME HAVE BEEN TRANSFERRED TO - IN - PROGRESS. THE A O OBSERVED THAT NO CONSTRUCTION/ DEVELOPMENT ACTIVITIES WERE S H OWN. THE AO OPINED THAT THE RENT INCOME NEEDS TO BE TAXED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY', AND ACC ORDINGLY, THE INCOME OF ASSESSEE WAS COMPUTED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' AT R S.1,1, 327/ - , AFTER ALLOWING DEDUCTION U/S.24(A) @30% OF RENT RECEIVED. 2.1. U PON ASSESSEE S APPEAL L D . CIT ( A ) CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY HO LDING AS UNDER : ITA NO. 4987 /MUM/201 4 M/S. SUN ENTERPRISES 3 I HAVE CAREFULLY PERUSED THE FACTS OF PRESENT CASE. AS PER SECTION 22 OF THE ACT, 'THE ANNUAL VALUE OF PROPERTY CONSISTING OF ANY BUILDINGS OR LAND APPURTENANT THERETO WHICH THE ASSESSES IS THE OWNER, OTHER THAN SUCH PORTIONS OF SUCH PROPE RLY AS HE MAY OCCUPY F O R THE PURPOSES OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM THE PROFITS OF WHICH ARE CHARGEABLE TO INCOME TAX, SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD 'INCOME FROM HOME PROPERTY' IN THE PRESENT CASE, THE APPELLANT IS THE OWNER OF THE PROPERTY 'DATAR BLOCK,' AND THE PROPERTY IS NOT USED FOR THE PURPOSE OF BUSINESS OR PROFESSION AS THE SAME IS RENTED BY THE APPELLANT. THE APPELLANT HAS CONTENDED THAT IT HAD ACQUIRED THE SAID PROPERTY, BEING LAND WITH STRUCTURES COMPRISING FO UR CHAWLS STANDING THEREON, WITH A VIEW TO DEVELOP AND CONSTRUCT THEREON COMMERCIAL PROPERTY BY DEMOLISHING ALL THE EXISTING STRUCTURES. THE APPELLANT HAS FURTHER SUBMITTED THAT IT HAD NOT CONSTRUCTED ANY OF THE CHAWLS FROM WHICH RENTAL ARE RECEIVED BUT T HE SAID STRUCTURES ALON G WITH THE TENANTS ALREADY EXIST AT THE TIME OF ACQUISITION OF THE LAND, AND THAT THE SAID LAND IS THE I NVENTORY FOR CARRYING ON BUSINESS IN NORMAL COURSE AS BUILDERS AND DEVELOPERS. I DO_NO T FIND MERIT IN SAID CONTENTIO NS OF APPELL ANT, AS FAR AS THE C HARG EA BI L ITY OF RENTAL INCOME UNDER THE HEAD 'INCOME FROM HOUSE PROPERLY' IS CONCERNED. I FIND THAT THERE IS NO STIPULATION IN SECTION 22 THAT THE RENTED OUT STRUCTURES SHOULD BE OF ANY PARTICULAR STANDARDS, OR THAT THE SAME SHOULD HAVE BEEN CONSTRUCTED BY THE ASSESSEE HIMSELF. THE SECTION 22 STIPULATES THE 'ANNUAL VALUE' OF PROPERTY TO BE CHARGED UNDER THAT SECTION, AND THE ANNUAL VALUE IS DETERMINED AS PER SECTION 23 OF THE ACT. AS PER SECTION 23, EVEN IF ANY PARTICULAR OWNED PROPERTY IS NOT RENTED OUT, STILL IT MAY BE CONSIDERED AS DEEMED RENTED OUT IN CERTAIN CASES, AND THE ANNUAL VALUE OF SUCH PROPERTY IS CHARGED TO TAX U/S 22, HENCE THERE IS NO QUESTION OF NOT CHARGING THE ANNUAL VALUE OF OWNED & ACTUALLY RENTED PROPERTY TO TAX U/S 22. THE EXCLUSION OF PROPERTY WHICH THE ASSESSEE 'MAY OCCUPY FOR THE PURPOSE OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM ' IS ONLY TO EXCLUDE SUCH P ROPERTY FROM THE DEEMING PROVISIONS OF SECTION 23 FOR THE PURPOSE OF DETERMINING ITS ANN UAL VALUE. H CA NNOT BE CONSTRUED TO MEAN THAT ANY OWNED BUSINESS PROPERTY EVEN IF OUT FOR A TEMPORARY PERIOD WOULD NOT BE TAXABLE U/S 22. RELYING UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SHAMBHU I NVESTME NT (P.) LTD. VS. CIT (2003) 263 ITR 143 (SC, . I OBSE RVE THA T THE PRIME OBJECT OF RENT AGREEMENT WAS TO LE T OUT THE PROPERTY, AND HENCE IT WOULD BE WRONG TO SAY THAT THE APPELLANT WAS EXPLOITING PROPERTY FOR IT S COMMERCIAL BUSINESS ACTIVITIES. THEREFORE , I FIND NO INFIRMITY IN THE ACTION OF AO IN TAXING THE RENTAL INCOME OF 'DATAR BLOCK' OWNED BY THE APPELLANT AFTER ALRE ADY ALLOWING DEDUCTIONS U/S . 24(A) UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY. THE APPELLANT HAS FURTHER CONTENDED THAT IF THE RENTAL INCOME IS CHARGED TO TAX UNDER INCOME FROM HOUSE PROPERTY, IT IS ENTITLED TO INTEREST EXPENDITURE U/S 24(B) IN RESPECT OF BORROW INGS FOR ACQUISITION OF PROPERT Y , I FIND THAT THE APPELLANT HAS CHARGED THE ENTIRE INTEREST EXPENDITURE TO WORK - IN - PROGRESS AS ITS BUSINESS EXPENDITURE, AND HENCE THE SAME CANNOT BE ALLO WED AGAIN AGAINST THE INCOME FROM HOUSE PROPERTY. IN VIEW OF THE ABOVE. I CONFIRM THE ADDITION OF INCOME FROM HOUSE PROPERTY OF RS. 1 ,17,327/ - AND THEREFORE, THE GROUND NO. 1 OF APPEAL IS DISMISSED. 3. AGAINST THE ABOVE ORDER , ASSESSEE IS IN APPEAL BEFOR E US. ITA NO. 4987 /MUM/201 4 M/S. SUN ENTERPRISES 4 4. WE HAVE HEARD BOTH THE COUNSEL A N D PERUSED THE RECORDS . THE S UBMISSION OF THE LD. COUNSEL OF THE ASSESSEE IN THIS REGARD ARE SUMMARIZED AS UNDER : - (I) THE APPELLANT IS A PARTNERSHIP FIRM AND THE MAIN OBJECT AS PER PARTNERSHIP DEED IS TO DO B USINESS OF TRADING, DEVELOPING, CONSTRUCTING AND SELLING REAL ESTATE. (II) THE APPELLANT'S PREDOMINANT ACTIVITY IS OF DEVELOPMENT AND CONSTRUCTION OF PROPERTIES WHICH IS CLEAR FROM FOLLOWING FACTS; THE FIRM HAD PURCHASED TWO PROPERTIES (1) DATAR BLOCK PROPERTY AND (2) CHOUDHARY PLOT. FOR PURCHASING SUCH PROPERTIES WHICH REPRESENTS STOCK IN TRADE, OR BUSINESS ASSET THE APPELLANT HAS TAKEN HUGE LOANS AND SAME WE RE INVESTED IN PURCHASE OF SAID TWO PROPERTIES: A.Y. LOAN RS INTEREST PAID STOCK IN TR ADE AY 2009 - 10 14. 18 CRORES 1.14 C RORES RS 14.88 CRORES AY 2010 - 11 15.26 CRORES 1.26 C RORES RS 17.20 CRORES THE APPELLANT HAS TAKEN DATAR BLOCK PROPERTY ALONG WITH TENANTS. ORIGINALLY THERE .WERE 45 TENANTS IN SAID PROPERTY. IN PRIOR YEARS APPELLANT G OT VACATED MANY TENANTS AND PAID HUGE SUMS TO TENANTS AGAINST SURRENDER OF TENANCY RIGHTS. THE APPELLANT HAD 27 TENANTS AS ON 31 - 3 - 2010. THE APPELLANT HAS PAID HUGE AMOUNTS OF SUM OF RS 59.70 LACS DURING THE YEAR FOR SURRENDER OF TENANCY RIGHTS OF 7 TENANT S IN DATAR BLOCK PROPERTIES: SR . NO DATE OF PAYMENT NAME OF TENANT KHOLI /ROOM NO AMOUNT RS (1) 22 - 4 - 2009 MEGHASYAM PANDEY 46 3,66,000 (2) 6 - 8 - 2009 PANDURANGS BURVE 50 7,50,000 (3) 16 - 5 - 2009 JAYESH MAKWANA 34 7,50,000 (4) 24 - 9 - 2009 CHINTAMANI RAJE 39 9,04,000 (5) 30 - 11 - 2009 SUSHILA D GORE 35 9,50,000 (6) 15 - 9 - 2009 MADHAVV . DATAR 49 10,00,000 (7) 7 - 8 - 2009 KISHORE H RATHOD 34 BLDG NO 3 12,50,000 TOTAL PAYMENT 59,70,000 THUS IT IS CLEAR THAT APPELLANT WANTED TO DEVELOP THE OLD DILAPIDATED CHAW L PROPERTY KNOWN AS 'QATAR BLOCK PROPERTY'. THUS IT CANNOT BE SAID THAT NO BUSINESS ACTIVITY IS CARRIED OUT DURING THE PREVIOUS YEAR. THE PRIMARY OBJECT OF APPELLANT IS TO DEVELOP THE PROPERTIES WHICH THE FIRM HAS PURCHASED AND FOR THIS, EXISTING TENANTS H AVE TO BE VACATED AND FOR THIS TILL YEAR END THE FIRM HAS PAID ABOUT RS 2.03 CRORES FOR SURRENDER OF TENANCY RIGHTS OF VARIOUS TENANTS. SUCH SUM PAID TOWARDS VACATING TENANCY RIGHTS WERE CAPITALISED IN WORK IN PROGRESS IN BALANCE SHEET. THIS IS ACCEPTED BY AO. SO AMOUNT RECEIVED AS RENT FROM REMAINING TENANTS ALSO REQUIRES ITA NO. 4987 /MUM/201 4 M/S. SUN ENTERPRISES 5 BE CONSIDERED OR ADJUSTED IN WORK IN PROGRESS. APPELLANT HAS NOT VOLUNTARILY GIVEN SUCH RIGHT TO ANY TENANT AFTER PURCHASE OF PROPERTY RATHER APPELLANT HAS PURCHASED SAID PROPERTY ALONG W ITH SITTING TENANTS. IN ORDER TO CARRY OUT BUSINESS OF DEVELOPMENT, THE SAID PROPERTY IS PURCHASED SO SUCH RENT RECEIVED IS IN COURSE OF BUSINESS. I T IS NOT A CASE WHERE APPELLANT HAS DEVELOPED PROPERTY AND THEN GIVEN ON RENT SOME UNITS TO EARN INCOME. N O BUSINESSMAN WILL PURCHASE A TENANTED PROPERTY FOR RS 7.50 CRORES TO EARN RENT INCOME OF PALTRY SUM OF RS 1,67,613/ - THAT TOO BY BORROWING HUGE LOANS ON WHICH APPELLANT IS PAYING INTEREST OF RS 1.26 CRORE. THIS CLEARLY PROVES THAT PRIMARY MOTIVE OF APPEL LANT IS TO DEVELOP THE PROPERTY AND NOT EARN RENT INCOME. THUS RELIANCE PLACED BY LD. C1T(A) ON DECISION OF SHAMBHU INVESTMENT (P) LTD. V CIT (2003) 263 ITR 143 IS MISPLACED. IN THIS CASE IT WAS PRIMARY OBJECT OF ASSESSEE WAS TO EARN RENT INCOME. THIS DECI SION IS DISTINGUISHABLE ON FACTS. THE APPELLANT ALSO RELIES ON DECISION OF HON'BLE SUPREME COURT IN CASE OF M/S RAYALA CORPORATION PVT. LTD, V ACIT (2016) 72 TAXMANN.COM 49. IN THIS CASE IT IS HELD THAT THE BUSINESS OF ASSESSEE IS TO LEASE ITS PROPERTY AN D TO EARN RENT THEN IT SHOULD BE TAXED AS BUSINESS INCOME AND NOT AS INCOME FROM HOUSE PROPERTY. IN CASE OF PFH MALL & RETAIL MANAGEMENT LTD. V. /TO [2008] 110 ITD 337 (ITAT - KOL) IT WAS HELD AS UNDER : 'THE MERE FACT THAT INCOME IS ATTACHED TO IMMOVABLE PROPERTY CANNOT BE SOLE CRITERION FOR ASSESSMENT OF SUCH INCOME AS INCOME FROM HOUSE PROPERTY. IT IS NECESSARY FURTHER TO FIND OUT THE PRIMARY OBJECT OF THE ASSESSEE WHILE EXPLOITING THE PROPERTY. IF THE MAIN INTENTION IS SIMPLY LETTING THE PROPERTY OR AN Y PORTION THEREOF THE RESULTANT INCOME MUST BE ASSESSED AS INCOME FROM HOUSE PROPERTY. IF ON THE OTHER HAND, THE MAIN INTENTION IS OF EXPLOITING IMMOVABLE PROPERTY BY WAY OF COMMERCIAL ACTIVITIES, AND THEN THE RESULTANT INCOME MUST BE HELD TO BE BUSINESS I NCOME' IN CASE OF CIT VS NEHA BUILDERS P LTD. (2007) 164 TAXMAN 342 GU] IT IS HELD THAT' IF PROPERTY IS GIVEN ON RENT AND PROPERTY IS HELD AS STOCK IN TRADE THEN PROPERTY INCOME REPRESENTS BUSINESS INCOME. IN C A SE OF CIT VS LOKHOLDINGS (2010) 189 TAXMAN 452 (BOMBAY), IT WAS HELD AS UNDER : - ASSESSEE - FLRM WAS INVOLVED IN BUSINESS OF DEVELOPMENT OF PROPERTIES - IN COURSE OF ITS BUSINESS, IT RECEIVED MONEY IN ADVANCE FROM ITS CUSTOMERS INTENDING TO PURCHASE FLATS IN PROPERTIES DEVELOPED BY IT - AS SAID MONEY S COULD NOT BE UTILIZED IMMEDIATELY FOR PURPOSE OF BUSINESS, ASSESSEE TEMPORARILY INVESTED SURPLUS AMOUNTS FROM SUCH MONEYS IN BANKS AND OTHER CONCERNS AND EARNED INTEREST THEREON - WHETHER, ON FACTS, INTEREST INCOME IN QUESTION WOULD BE ASSESSABLE AS INCO ME FROM BUSINESS AS CLAIMED BY ASSESSEE AND NOT AS INCOME FROM OTHER SOURCES - HELD, YES ITA NO. 4987 /MUM/201 4 M/S. SUN ENTERPRISES 6 IN THIS CASE ALSO INTEREST RECEIVED WAS ULTIMATELY REDUCED FROM WIP OF PROJECT. THE RATIO OF THIS DECISION IS SQUARELY APPLICABLE TO PRESENT CASE IN HAND. IN CASE OF SAMAR ESTATE PVT . LTD VS I TO, 61 TAXMANN.COM 23 ( CHANDIGARH TRIB.) IT WAS HELD THAT INTEREST EARNED ON FOR IS BUSINESS INCOME AND NOT INCOME FROM OTHER SOURCES AS FDRS WERE PURCHASED OUT OF SALE PROCEEDS ON SALE OF FLATS AND AS PROJECT WAS NOT COMPLETED DU RING THE YEAR SO ALL EXPENSES WERE CAPITALIZED AS WORK IN PROGRESS SO INTEREST RECEIVED ALSO REQUIRES TO BE REDUCED FROM WIP. IN VIEW OF ABOVE DISCUSSION THE LD. CIT(A) ERRED IN CONFIRMING THE RENT INCOME TO BE TAXED UNDER HEAD INCOME FROM HOUSE PROPERTY AND NOT UNDER BUSINESS INCOME. AS A RESULT, IT IS HEREBY REQUESTED THAT AO MAY BE DIRECTED TO TAX RENT INCOME AS INCOME FROM BUSINESS AND NOT AS INCOME FROM HOUSE PROPERTY AND RENT INCOME MAY BE ALLOWED TO BE REDUCED FROM WIP OF THE PROJECT. 5 . PER CONTR A , THE LD. DR RELIED UPON THE ORDER OF AUTHORITIES BELOW. 6. UPON CAREFUL CONSIDERATION, WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BUILDER AND DEVELOPER. THE ASSESSEE WAS IN THE POSSESSION OF DATAR BLOCK PROPERTY WHICH IT WAS IN THE PROCESS OF DEVELOPING. THE SAID PROPERTY HAD SOME TENANTS. THE ASSESSEE HAD TO PAY LARGE AMOUNTS OF MONEY IN ORDER TO GET THE PROPERTY VACATED. THESE SUMS PAID HAVE BEEN CAPITALIZED IN WORK - IN - PROGRESS WHICH HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. HOWEVER, FO R THE SAME PROPERTY, THE TENANTS HAD PAID RENT ALSO WHICH WERE TREATED BY THE ASSESSEE BY CREDITING TO THE WORK - IN - PROGRESS. HOWEVER, THE ASSESSING OFFICER HOLDS THE SAME TO BE INCOME FROM HOUSE PROPERTY. IN THIS REGARD, WE NOTE THAT THE ASSESSEES BUSINES S IS DEVELOPMENT OF PROPERTY. FOR THE SAME PROPERTY, FOR GETTING VACATION, THE SUMS PAID ARE BEING DEBITED TO THE WORK - IN - PROGRESS WHICH IS BEING ACCEPTED BY THE ASSESSING OFFICER. HOWEVER, PENDING VACATION, THE RENT RECEIPT FROM THE TENANTS OF THE SA ID PR OPERTY IS NOT BEING GIVEN THE SAME TREATMENT BY THE ASSESSING OFFICER . H E IS TREATING THE SAME AS INCOME FROM HOUSE PROPERTY. IN OUR CONSIDERED OPINION, THE RENT RECEIVED IS INEXTRICABLY LINKED WITH THE BUSINESS OF THE ASSESSEE, I.E., DEVELOPMENT OF THE PR OPERTY. HENCE, IN OUR CONSIDERED OPINION, THE RENT RECEIVED CANNOT BE TREATED AS INCOME FROM HOUSE PROPERTY AND THE ASSESSEES ITA NO. 4987 /MUM/201 4 M/S. SUN ENTERPRISES 7 TREATMENT OF CREDITING THE SAME TOWARDS WORK - IN - PROGRESS IS JUSTIFIED. FOR THIS PROPOSITION, THE CASE LAWS RELIED UPON BY THE LD. COUNSEL OF THE ASSESSEE REFERRED IN THE SUBMISSIONS HEREINABOVE ARE GERMANE AND SUPPOR T THE CASE OF THE ASSESSEE , PARTICULAR THE CASE LAW FROM THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF LOKHOLDINGS (SUPRA) IS OF PARTICULAR EMPHASIS. ACCORDINGLY, IN THE BACKGROUND OF THE AFO RESAID DISCUSSION AND PRECEDENT WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 6 . A PROPOS GROU ND NO. 2 : B RIEF FACTS OF THE CASE ARE THAT THE AO OBSERVED THAT DURING THE YEAR UNDER CO NSIDERATION AS PER AGREEMENT DATED 19.06.2009, ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH M/S SHREE SACHIDANAND DEVELOPERS FOR THE DEVELOPMENT OF CHOUDHARY PLOT AT THANE FOR A MONETARY CONSIDERATION OF RS.25 LAKHS AND CONSTRUCTED AREA WITH ALL AMENITIES E QUIVALENT TO 7,395 SQ.FT. CARPET AREA (EQUIVALENT TO 10.500 SQ.FT.) SALEABLE RESIDENTIAL CONSTRUCTED AREA ON PRO - RATA BASIS IN THE BUILDING TO BE CONSTRUCTED ON THE SAID PROPERTY. IT WAS OBSERVED THA T THE ASSESSEE HAD CONSIDERED THE MONETARY CONSIDERATION OF RS.25 LAKHS RECEIVED IN THE CONSTRUCTION ACCOUNT, AND NO INCOME WAS SHOWN BY ASSESSEE ON THE BASIS OF DEVELOPMENT AGREEMENT 19 . 06.2009. HENCE, THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE CONSIDERATION RECEI VED OF RS.25 LAKHS ALONGWITH SALE CONSIDERATION O F CONSTRUCTED AREA EQUIVALENT TO 105 00 SQ.FT. BUILT UP AREA SHOULD NOT BE TAKEN AS INCOME EARNED. IN RESPONSE, THE AR OF ASSESSEE SUBMITTED THAT THE AMOUNT RECEIVED OF RS.25 LAKHS WAS TRANSFERRED TO WIP ACCOUNT, AND ON RECEIPT OF THE FINAL SALE CONSIDERATI ON IN F.Y. 2011 - 12, THE ASSESSEE HAD OFFERED TO TAX THE NET PROFIT (SALE PROCEEDS - WIP AS ON DATE OF SALE AFTER REDUCING THE AMOUNT OF RS.25 LAKHS). IT WAS FURTHER SUBMITTED THAT IF THE AMOUNT OF RS.25 LAKHS WAS CHARGED AS INCOME, THE COST INCURRED BY ASS ESSEE WOULD BE REQUIRED TO BE REDUCED FROM THE SALE CONSIDERATION. AFTER CONSIDERING THE REPLY OF ASSESSEE , THE AO FOUND THAT THE POSSESSION OF THE PLOT WAS GIVEN TO ITA NO. 4987 /MUM/201 4 M/S. SUN ENTERPRISES 8 THE SAID DEVELOPER OF PLOT. THEREFORE, THE MONETARY CONSIDERATION RECEIVED OF RS.25 LAKHS ALONG WITH SELLING COST OF THE CONSTRUCTED SALEABLE AREA EQUIVALENT TO 10,500 SQ.FT. BUILT UP AREA WAS TO BE TAXED. IN ABSENCE OF DETAILS, THE AO CONSIDERED THE COST OF SALEABLE AREA AT THE RATE OF RS.2,500 PER SQ.FT. WHICH WORKED OUT TO RS.2,65,50 , 000 / - A ND ALLOWED THE EXPENSES OF RS.1 , 89,95,977 / - PROVIDED BY ASSESSEE IN RESPECT OF CHOUDHARY PLOT AND PROPORTIONATE INTEREST & OTHER EXPENSES OF RS. 16,63,3257 - . ACCORDINGLY, THE INCOME OF ASSESSEE FROM CHOUDHARI PLOT W AS CALCULATED AT RS.25,00,000 + 2.62,50,0 00 - 1,89,95,977 - 16,63,325 - RS. 80,90,698/ - 7. U PON ASSESSEES APPEAL L D . CIT ( A ) CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY HOLDING AS UNDER : - 5.4 . I HAVE PERUSED FACTS OF THE EASE CAREFULLY. THE AO HAS BROUGHT TO TAX THE PROFIT ON TRANSFER OF DEVELOPMENT RIGHTS OF 'CHAUDHARY PLOT, THANE' PROPERTY ON THE BASIS OF 'AGREEMENT FOR DEVELOPMENT & SALE' DATED 19.06.2009. THE APPELLANT HAS SUBMITTED THE COPY OF SAID AGREEMENT DATED 19.06.2009, WHICH IS DULY REGISTERED WITH THE REGISTRAR. AS PER SAID AG REEMENT, THE APPELLANT, REFERRED AS 'OWNERS', WAS DESIROUS OF DEVELOPING THE SAID PROPERTY BY CONSTRUCTING THEREON CLUSTER OF BUILDINGS AS PER THE PLANS AND SPECIFICATIONS TO BE SANCTIONED BY THE THANE MUNICIPAL CORPORATION AND OTHER COMPETENT AUTHORITIES. IN CONSIDERATION OF THE OWNERS GRANTING DEVELOPMENT RIGHTS OF SAID PROPERTY TO THE DEVELOPERS, THE DEVELOPERS WOULD PAY TO THE OWNERS (A) M ONETARY CONSIDERATION OF RS.25 LAKHS SIMULTANEOUSLY WITH THE EXECUTION OF SAID AGREEMENT, (B) 7395 SQ. FT. OF CARP ET AREA, EQUIVALENT TO 10500 SQ. FT. OF BUILT UP AREA ON PRO - RATA BASIS IN THE BUILDING CONSTRUCTED ON SALE PROPERTY. THE PARTIES IN JOINT CONSULTATION SHALL DECIDE THE SAID AREA TO BE ALLOTTED TO THE OWNERS AFTER ISSUANCE OF COMMENCEMENT CERTIFICATE BUT BEF ORE COM MENCEMEN T OF WORK ON THE SITE. SIMULTANEOUSLY WITH THE EXECUTION OF THE AGREEMENT, OWNERS HAVE HANDED OVER TO THE DEVELOPERS THE PHYSICAL POSSESSION OF THE SAID P ROPERTY AS LICENSEE, AND HENCEFORTH, THE DEVELOPERS WOULD BE IRREVOCABLY AND UNCONDITIONALLY ENTITLED TO APPROACH THE PLANNING AUTHORITY AND TO OBTAIN THE LEGAL POSSESSION OF THE SAID PROPERTY. SIMULTANEOUSLY WITH THE EXECUTION OF THE AGREEMENT, THE OWNERS HAD EXECUTED A POWER OF ATTORNEY CONSTITUTING THE DEVELOPERS AS THEIR TRUE AND LAWFUL ATTORNEY TO DO VARIOUS WORK RELATING TO THE PROPERTY INCLUDING THE SANCTION OF PLANS, SPECIFICATIONS FOR CONSTRUCTION ON THE SAID PROPERTY, TO CARRY OUT CONSTRUCTION AND DEVELOPMENT OF SAID PROPERTY, SAVE AND EXCEPT THE SALEABLE AREA TO BE GIVEN TO THE OWNERS, TO SELL THE REMAINING FLATS AND PREMISES ETC. THE OWNERS SHALL EXECUTE IN THE NAME OF DEVELOPERS THE CONVEYANCE OF SAID PROPERTY. THE DEVELOPERS SHALL HAVE AN OPTION EITHER TO CALL UPON THE OWNERS TO EXECUTE THE CONVEYANCE PERSONALLY OR AT THE DISCRETION OF DEVELOPERS, TO GET THE CONVEYANCE EXECUTED ON THE STRENGTH ITA NO. 4987 /MUM/201 4 M/S. SUN ENTERPRISES 9 OF SAID SUBSTITUTED POWER OF ATTORNEY AND DEVELOPERS' DECISION IN THIS RESPECT WOULD BE FINAL. ON GOING THROUGH THE AFORESAID TERMS OF AGREEMENT, IT APPEARS THAT THE APPELLANT IT HAD TRANSFERRED ALL RIGHTS IN THE SAID PROPERTY FOR CONSIDERATION OF RS.25.00,000/ - PLUS 10500 SQ.FT. OF CONSTRUCTED AREA IN THE BUILDING PROPOSED TO BE CONSTRUCTED. ALS O, THE APPELLANT HAS ALIENATED POSSESSION OF THE PROPERTY, AND MOREOVER EXECUTED IRRE VOCABLE POWER OF ATTORNEY IN FAVOUR OF THE DEVELOPER ASSIGNING ALL RIGHTS IN THE SAID PROPERTY, 'EXCEPT THE 10500 SQ.FT. OF CONSTRUCTED AREA. AS PER SEC. 2(47)(V), 'ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAK EN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1885 (4 OF 1882)' IS CONSIDERED AS A 'TRANSFER'. FURTHER, THE REFERRED SECTION 53A OF TRANSFER OF PROPERTY ACT, 1882 STIPULATES THAT '53A. PART PERFORMANCE. WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDERATION ANY IMMOVABLE PROPERTY BY WRITING SIGNED BY HIM OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TRANSFER CAN BE ASCERTAINED WITH REASONABLE CERTAINTY, AND TH E TRANSFEREE HAS, IN PART PERFORMANCE OF THE CONTRACT, TAKEN POSSESSION OF THE PROPERTY OR ANY PART THEREOF, OR THE TRANSFEREE, BEING ALREADY IN POSSESSION, CONTINUES IN POSSESSION IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT IN FURTHERANCE OF THE CONTRACT, AND THE TRANSFEREE HAS PERFORMED OR IS WILLING TO PERFORM HIS PART OF THE CONTRACT, THEN, NOTWITHSTANDING THAT WHERE THERE IS AN INSTRUMENT OF TRANSFER, THAT THE TRANSFER HAS NOT BEEN COMPLETED IN THE MANNER PRESCRIBED THEREFOR E BY THE LAW F OR THE TIME BEING IN FORCE, THE TRANSFEROR OR ANY PERSON CLAIMING UNDER HIM SHALL HE DEBARRED FROM ENFORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMING UNDER HIM ANY RIGHT IN RESPECT OF THE PROPERTY OF WHICH THE TRANSFEREE HAS TAKEN OR CONTINUED IN POSSES SION, OTHER THAN A RIGHT EXPRESSLY PROVIDED BY THE TERMS OF THE CONTRACT: PROVIDED THAT NOTHING IN THIS SECTION AFFECT THE RIGHTS OF A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF THE CONTRACT OR OF THE PART PERFORMANCE THEREOF. ' IN THE PRESENT CASE, THE POSSESSION OF IMMOVABLE HAS BEEN GIVEN IN PART PERFORMANCE OF THE CONTRACT; CONTRACT (REGISTERED HAS BEEN ENTERED INTO, CONSIDERATION IS ASCERTAINED I.E. RS.25,00,000/ - PLUS 1050 0 SQ. FT. OF BUILT - UP AREA; TRANSFEREE (THE APPELLANT) HAS PERFORMED HIS P ART OF CONT RACT BY GIVING POSSESSION OF PROPERTY AND ALSO BY EXECUTING IRREVOCABLE POWER OF ATT ORNEY IN FAVOUR OF THE DEVELOPERS; AND THE RIGHTS OF PARTIES ARE EXPRESSLY PROVIDED BY THE TERMS OF THE CONTRACT, MOREOVER, THE APPELLANT ITSELF HAS CAPTIONED TH E SAID AGREEMENT AS AGREEMENT FOR DEVELOPMENT & SALE'. THEREFORE, THE APPELLANT CAN SAFE LY BE CONSTRUED AS HAVING TRANSFERRED THE SAID PROPERTY IN THE YEAR UNDER CONSIDERATION. MERELY BECAUSE PART OF THE SALE CONSIDERATION WAS RECEIVABLE BY THE APPELLANT IN THE FORM OF CERTAIN BUILT - UP AREA IN THE PROPOSED BUILDING DID NOT CHANGE THE CHARACTER OF THE TRANSACTION, AS IT WAS ONL Y A MODE OF RECEIVING THE SALE CONSIDERATION. THEREFORE, THE APPELLANT WA S LIABLE TO OFFER THE INCOME TO TAX IN THE YEAR O F ENTERI NG INTO SAID AGREEMENT DATED 19.06.2009, I.E. IN THE A.Y. 2010 - 11 UNDER CONSIDERATION. THEREFORE. I FIND N O INFIRMITY IN THE ACTION OF AO IN BRINGING THE INCOME ON TRANSFER OF SAID PROPERTY TO TAX IN A.Y. 2010 - 11 UNDER CONSIDERATION. AS REGARDS THE COMPUTA TION OF SUCH INCOME, THE APPELLANT HAD NOT PROVIDED AN Y INFORMATION TO COMPUTE THE SALE RATE FOR 1 0500 SQ.FT.. AND IN ABSENCE OF DETAILS, THE AO COMPUTED THE COST OF SALEABLE AREA AT THE RATE OF 2 , 500/ - PER SQ.FT. AGGREGATING TO RS . 265.50 LAKHS. THE APPEL LANT HAS S TATED THAT THE STA MP DUTY VALUATION WAS ONLY R S. 164.09 LAKHS, HO WEVER I FIND ITA NO. 4987 /MUM/201 4 M/S. SUN ENTERPRISES 10 THA T THE AO WAS NOT OBLIGED TO ESTIMATE THE SALE CONSIDERATION BASED ON STAMP DU T Y VALUATION, AND HE WAS JUSTIFIED IN ESTIMATING THE SALE CONSIDERATION AT MARKET RATE TO T HE BEST OF HIS JUDGMENT IN THE GIVEN CIRCUMSTANCES. IT IS ALSO ON RECORD THAT THE APPELLANT SUBSEQUENTLY HAS AGREED TO RECEI V E RS.300.00 LAKHS IN LIEU OF THE 10500 SQ.FT. BUILT UP AREA BY EXECUTING ANOTHER AGREEMENT DATED 28.11.2011. WHICH PROVES THAT THE ESTIMATE MADE BY THE AO WAS NOT EXAGGERATED. 'THE APPELLANT'S FURTHER CONTENTION THAT IT HAD ALREADY OFFERED TO TAX THE PROFIT ON THE TRANSACTION IN SUBSEQUENT A.Y. 2012 - 1 3 IS OF NO SIGNIFICANCE WHEN IT IS PROVED THAT THE SAME WAS ALREADY TAXABLE IN A.Y. 2010 - 11 UNDER CONSIDERATION. WITHOUT PREJUDICE, THE APPELLANT HAS SUBMITTED THE I.T. RETURN AND COMPUTATION OF INCOME FOR A.Y. 2012 - 13. WHICH SHOWS THAT THE APPELLANT HAS FILED A LOSS RETURN SHOWING LOSS OF RS. (98.60, 0 85/ - ). THE PROFIT &. LOSS ACCOUN T OF APPELLANT SHOWS 'INCOME FROM SHARE, PROFIT ETC.' O F RS.97.30 LAKHS AGAINST WHICH INTEREST PAYABLE ON UNSECURED LO A NS OF RS.196.51 LAKHS IS CLAIMED AMONGST OTHER EXPENSES, THE ALLOWABILITY OF WHICH AGAINS T THE PROFIT ON TRANSFER OF PROPERTY IS NOT PR OVED. THEREFORE, EFFECTIVELY, THE APPELLANT HAS NOT EVEN OFFERED THE SAID PROFIT TO T A X IN A.Y. 2012 - 11 . IN VIEW OF THE ABOVE, I CONFIRM THE ADDITION MADE OF RS. 80,90,698/ - TO BUSINESS INCOME OF THE APPELLANT . THEREFORE, THE G ROUND NO. 2 OF APPEAL IS DISM ISSED . 6. T HE G ROUND NO. 3 OF APPEAL IS GENERAL IN NATURE, AND HENCE DOES NO T REQUIRE SEPARATE ADJUDICATION. IN THE SAID GROUND, THE APPELLANT HAS ALSO PRAYED TO CANCEL THE PENALTY PROCEEDINGS U/S 271(1 )(C ) . HOWEVER, SINCE N O PENALTY HAS ACTUALLY BEEN LE VIED IN THE ASSESSMENT ORDER, IT BEING PREMATURE AT THIS STAGE NEED NOT BE ADJUDICATED. 8 . AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE US. 9 . WE HAVE HEARD BOTH THE COUNSEL A N D PERUSED THE RECORDS . THE SUB MISSIO N OF THE LD. COUNSEL FOR THE ASSES SEE IS SUMMARIZED BELOW: - THE APPELLANT HAS SHOWN CHOUDHARY PLOT OF THANE AS STOCK IN TRADE IE BUSINESS ASSET WHICH SUBSEQUENTLY APPELLANT HAS GIVEN TO M/S SHREE SACHIDANAND DEVELOPERS FOR DEVELOPMENT, AS APPELLANT IS NOT ABLE TO REDEVELOP THE PLOT BEC AUSE OF PREOCCUPATION IN OTHER WORK. THE APPELLANT AS STATED EARLIER IS ENTITLED 10500 SQ FT CONSTRUCTED AREA OF PROJECT WHICH APPELLANT WILL GET IN FUTURE. THE PLAN OF PROJECT IS NOT APPROVED DURING THE YEAR, NO CONSTRUCTION WORK HAS ADMITTEDLY STARTED DU RING THE YEAR. SO THERE IS NO QUESTION OF ACCRUAL OF INCOME DURING THE YEAR UNDER CONSIDERATION. ON IDENTICAL FACTS IN CASE OF ITO VS FFNIAN ESTATE DEVELOPERS PVT. LTD. [2012] 23 TAXMANN.COM 360 (DELHI TRIB) IT WAS HELD THAT AS THERE IS NO APPROVAL OF PLAN OF PROJECT NOR THERE WAS ANY CONSTRUCTION ACTIVITY STARTED DURING THE YEAR SO THERE IS NO ACCRUAL OF INCOME DURING THE YEAR. RELIANCE IS ALSO PLACE ON DECISION IN CASE OF FARDEEN KHAN VS ACIT [2015] 58 TAXMANN.COM 186 (MUMBAL TRIB.) II ) FURTHER THE A PPELLANT HAS ENTERED IN TO AN AGREEMENT TO SALE THE DEVELOPMENT RIGHT IN SAID PROPERTY WHICH IS STOCK IN TRADE . SO PROVISIONS OF SECTION 2(47)(V) ARE NOT APPLICABLE ITA NO. 4987 /MUM/201 4 M/S. SUN ENTERPRISES 11 WHICH IS RELATING TO CAPITAL ASSET FOR THE PURPOSE OF COMPUTING CAPITAL GAIN . SO CIT(A) H AS MISGUIDED HIMSELF BY APPLYING PROVISIONS OF SEC 2(47) (V) RELATING TO TRANSFER OF CAPITAL ASSET . ON IDENTICAL FACTS IN CASE OF DHEERAJ AMIM VS ACIT [2016] 71 TAXMANN.COM 288 (BANGALORE), IT WAS HELD THAT A ASSESSEE - BUILDER WHO IS HAVING PROPERTY AS STOC K IN TRADE AND HE ENTERS INTO AGREEMENT WITH OTHER DEVELOPER TO DEVELOP STOCK IN TRADE PROPERTY AND IN RETURN THE ASSESSEE GETS CERTAIN CONSTRUCTED AREA IN FUTURE PROJECT THEN PROFIT CANNOT BE BROUGHT TO TAX IN THE YEAR OF AGREEMENT AS ASSESSEE HAS NOT GO T CONSTRUCTED AREA IN THE YEAR UNDER CONSIDERATION. IN PRESENT CASE ON HAND, THE APPELLANT HAS ENTERED INTO AN AGREEMENT FOR DEVELOPMENT OF CHOUDHARY PLOT OF LAND, WHICH IS STOCK IN TRADE, WITH M/S SHREE SACHIDANAND DEVELOPERS. THE APPELLANT FIRM IS G ETTIN G IN CONSIDERATION IS RS 25 LACS PLUS CONSTRUCTED AREA OF 10500 SQ FT IN FUTURE PROJECT. THUS IN CLOSING STOCK EVEN IF APPELLANT IS TO SUBSTITUTE IT'S THE RIGHT IN CHOUDHARY PROPERTY TO SALE 10500 SQ FT OF CONSTRUCTED AREA, IT WOULD NOT MAKE ANY DIFFERENCE TO THE PROFIT FIGURE AS FAR AS APPELLANT IS CONCERN., AS COST OF ACQUIRING THIS RIGHT IS SAME AS COST OF GIVING UP THE RIGHT IN HAND AND IT IS THE SETTLED LEGAL POSITION, THE CLOSING STOCK CAN ONLY BE VALUED AT COST OR MARKET PRICE WHICHEVER IS LOWER. IN PRESENT CASE COST OF APPELLANT'S RIGHT IN CHODHARY PLOT IS LESS THAN THE MARKET PRICE OF RIGHT TO SELL THE 10,500 SQ FT IN THE PROJECT. ACCOUNTING STANDARD 2, WHICH IS MANDATORY ACCOUNTING STANDARD UNDER SEC 145(2) ALSO STATES THAT 'INVENTORIES SHALL BE VALUED AT COST OR NET REALISABLE VALUE WHICHEVER IS LOWER.' HENCE COST OF NEWLY CONSTRUCTED AREA HAS TO BE TAKEN AT COST. THUS NO PROFIT CAN BE TAXED IN THE YEAR UNDER CONSIDERATION. III) THE APPELLANT AS STATED EARLIER HAS ENTERED IN TO AN AGREEME NT TO SALE THE RIGHTS IN CHOUDHARY PROPERTY. THE APPELLANT HAS RECEIVED PART OF SALE CONSIDERATION I . E . 25 LACS DURING THE YEAR. THE SAID RIGHT IN THE PROPERTY IS STOCK IN TRADE OR BUSINESS ASSET. APPELLANT IS FOLLOWING MERCANTILE METHOD OF ACCOUNTING. IN SUCH CASE SALE CONSIDERATION FOR TRANSFER OF RIGHT SHALL BE TAXABLE AS PER REVENUE REORGANISATION METHOD REGULARLY EMPLOYED AND FOLLOWED BY APPELLANT. IN CASE OF CIT VS MOTILAL PATEL & CO. (1988) 40 TAXRNAN 336 (GUJ) IT IS HELD THAT UNLESS AND UNTIL SALE T RANSACTION OF IMMOVABLE PROPERTY IS COMPLETED BY MEANS OF REGISTERED SALE DEED THERE CANNOT BE EARNING OF PROFIT. THE FACT THAT THE SALE CONSIDERATION IS RECEIVED PRIOR TO SUCH REGISTRATION, IN PURSUANCE OF AN AGREEMENT TO SALE WOULD NOT MAKE ANY DIFFERENC E. THE APPELLANT REDUCED RS 25,00,000/ - FROM WORK IN PROGRESS AS APPELLANT BEING DEVELOPER AND IS FOLLOWING BOOKING OF PROFIT ON PERCENTAGE COMPLETION METHOD. DURING THE YEAR UNDER CONSIDERATION THERE IS NO CONSTRUCTION ACTIVITY OF THE SAID PROJECT EVEN TH E PLAN OF PROJECT IS NOT APPROVED BY COMPETENT AUTHORITY DURING THE YEAR. THUS AS PER ACCOUNTING STANDARD THE APPELLANT HAS CORRECTLY REDUCED THE WORK IN PROGRESS BY RS 25 LACS AS SAME I S PART OF SALE PROCEEDS ONLY WHEN IN FUTURE APPELLANT GETS 10500 SQ FT BUILT UP AREA AS PER DEVELOPMENT AGREEMENT TILL THAT TIME SAID AMOUNT IS NOT PART OF SALE PROCEEDS. IV) THE APPELLANT HAS SHOWN PROFIT RELATABLE TO SALE OF CHOUDHARY PLOT IN AY 12 - 13 AND AFTER CONSIDERING SUCH PROFIT THERE WAS RETURNED LOSS OF RS . 9 8 , 60,0 85/ - .AS PER DETAILS AVAILABLE ON RECORD THE PROFITS ON SALE OF DEVELOPMENT RIGHTS I N CHOUDHARY PLOT WAS ALREADY TAXED IN AY 2010 - 11 SO AO SHOULD HAVE EXCLUDED SUCH , PROFITS FROM COMPUTATION OF INCOME IN AY 2012 - 13 OR ALTERNATELY AO SHOULD HAVE RECORDE D THE FINDING THAT SUCH PROFIT IS BEING ITA NO. 4987 /MUM/201 4 M/S. SUN ENTERPRISES 12 TAXED ON PROTECTIVE BASIS IN AY 2012 - 13 AS SAME I S ALREADY TAXED IN AY 2010 - 11. THE AO IS NOT CLEAR I N HIS MIND IN WHICH YEAR THE SAID INCOME I S TO BE TAXED AND AS A RESULT HE HAS TAXED SAID INCOME IN BOTH ASSESSMENT YEARS SUBSTANTIVELY WHICH IS NOT IN ACCORDANCE WITH THE LAW AND FOR THE REASONS STATED EARLIER THE SAID INCOME HAS TO BE CORRECTLY TAXED IN AY 2012 - 13 A ND ACCORDING LY ADDITION MADE BY AO OF RS. 80, 90,698/ - NEEDS TO BE DELETED AS THIS AMOUNTS TO DOUBLE TAX ATION. V) IN VIEW OF ABOVE DISCUSSION IT IS HUMBLY PRAYED THAT ORDER OF CIT(A) MAY KINDLY BE SET ASIDE AND RETUNED NIL INCOME MAY BE RESTORED. 10. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF AUTHORITIES BELOW . 11. WE HAV E HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. UPON CAREFUL CONSIDERATION, WE NOTE THAT THE ASSESSEE HA S ENTERED INTO AN AGREEMENT FOR SALE WITH SACHIDANAND DEVELOPERS FOR THE DEVELOPMENT OF ITS P LOT AT THANE FOR A MONETARY CONSIDERATION OF RS.25 LACS A ND CONSTRUCTED AREA WITH ALL AMENITIES EQUIVALENT TO 7,395 SQ.FT. CARPET AREA, SALEABLE RESIDENTIAL CONSTRUCTED AREA . T HE MONETARY CONSIDERATION OF RS.25 LAKHS RECEIVED WAS CREDITED BY THE ASSESSEE IN THE WORK - IN - PROGRESS. HOWEVER, NO INCOME WAS SHOWN FOR THE CARPET AREA RECEIVABLE AS PER THE DEVELOPMENT AGREEMENT. SUBSEQUENTLY, THE ASSESSEE ENTERED INTO AN AGREEMENT FOR THE RECEIPT OF RS.300 LACS ON 28.11.2011 I N LIEU OF THE CARPET AREA IT WAS ENTITLED AS PER THE AGREEMENT FOR SALE. THE ASSESSEE OFFERED TH E SAME FOR TAXATION IN ASSESSMENT YEAR 2012 - 13. THE ABOVE WAS NOT ACCEPTED BY THE AUTHORITIES BELOW. THE REVENUE IS OF THE VIEW THAT THE ASSESSEE SHOULD HAVE ACCOUNTED FOR THE VALU E OF CONSTRUCTED AREA TO BE ACQUIRED PURSUANT TO THE DEVELOPMENT AGREEMENT. HOWEVER, THE ASSESSEES PLEA IS THAT NO CONSTRUCTION WORK HAD COMMENCED AND EVEN THE PLAN OF THE PROJECT WAS NOT APPROVED. HENCE, IT HAS BEEN CLAIMED THAT THERE IS NO QUESTION OF ACCRUAL OF INCOME DURING THE YEAR. FOR THIS PROPOSITION, RELIANCE HAS BEEN PL ACED BY THE TRIBUNAL DECISIONS. FURTHER, THE CLAIM OF THE ASSESSEE IS THAT THE AGREEMENT TO SALE THE DEVELOPMENT RIGHT IN THE SAID PROPERTY IS RELATED TO ASSESSEES STOCK - IN - TRADE AND, HENCE, SINCE THE STOCK - IN - TRADE IS TO BE VALUED AT COST OR NET REALIZAB LE VALUE, NO PROFIT CAN BE ATTRIBUTED BY THE ASSESSEE IN THIS REGARD. ITA NO. 4987 /MUM/201 4 M/S. SUN ENTERPRISES 13 12. W E FIND T H A T THE CASE LAW FROM THE TRIBUNAL REFERRED BY THE LD. COUNSEL OF THE ASSESSEE SUPPORT THE PROPOSITION THAT IF THE PLAN OF THE PROJECT IS NOT APPROVED AND NO CONSTRUCTION WORK HAS BEEN DONE DURING THE YEAR, THERE CANNOT BE ANY ACCRUAL OF INCOME DURING THE SAID YEAR. PRINCIPALLY , WE FIND OURSELVES IN AGREEMENT WITH THIS PROPOSITION IN LIGHT OF THE TRIBUNAL DECISION REFERRED BY THE LD. COUNSEL OF THE ASSESSEE. HOWEVER, THIS F ACTUAL ASPECT NEEDS VERIFICATION AT THE LEVEL OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL EXAMINE AS TO WHETHER THE ASSESSEES CLAIM THAT DURING THE YEAR NEITHER THE PLAN OF THE PROJECT WAS APPROVED NOR ANY CONSTRUCTION WAS STARTED . IF THE SAID C LAIM IS TRUE, THE RATIO FROM THE TRIBUNALS DECISIONS REFERRED BY THE ASSESSEE IN THE SUBMISSIONS HEREINABOVE WILL FOLLOW. THE ASSESSEE CANNOT BE FASTEN ED WITH LIABILITY FOR TAXATION ON HYPOTHETICAL INCOME. ACCORDINGLY , WE REMIT THE ISSUE TO THE FILE OF TH E ASSESSING OFFICER WITH THE ABOVE DIRECTIONS. 13. IN THE RESULT, THIS APPEAL BY THE ASSESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16 /07 /2018. SD/ - SD/ - ( RAMLAL NEGI ) ( SHAMIM YAHYA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ,MUMBAI , DATED : 16 /07 /2018 JV, SR. PS ITA NO. 4987 /MUM/201 4 M/S. SUN ENTERPRISES 14 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPO NDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORD ER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI