Appeal details
Counselvise Citation
56924514 RSA 2013
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 10 month(s) 29 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-01-2015
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Next Hearing Date
03-07-2014
Assessment Year
2009-2010
Appeal Filed On
01-03-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.118/PN/2013 (ASSESSMENT YEAR : 2009-10) M/S ASIAD DEVELOPERS, 1410 C WARD, LAXMIPURI, KOLHAPUR 416 002. PAN : AACFA4662Q . APPELLANT VS. JT. COMMISSIONER OF INCOME TAX, RANGE 1, KOLHAPUR. . RESPONDENT ITA NO.569/PN/2013 (ASSESSMENT YEAR : 2009-10) INCOME TAX OFFICER, WARD 1(1), KOLHAPUR. . APPELLANT VS. M/S ASIAD DEVELOPERS, 1410 C WARD, LAXMIPURI, KOLHAPUR 416 002. PAN : AACFA4662Q . RESPONDENT ASSESSEE BY : MR. PRAMOD SHINGTE & MR. C. V. DESHPANDE DEPARTMENT BY : MR. P. S. NAIK DATE OF HEARING : 11-11-2014 DATE OF PRONOUNCEMENT : 28-01-2015 ORDER PER G. S. PANNU, AM THE CAPTIONED ARE CROSS-APPEALS PREFERRED BY THE AS SESSEE AND THE REVENUE FOR ASSESSMENT YEAR 2009-10 WERE HEARD TOGE THER AND ARE BEING DISPOSED-OFF BY WAY OF A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. THE CAPTIONED CROSS-APPEALS ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), KOLHAPUR DATE D 10.12.2012 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 15.09.2011 PAS SED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). ITA NO.118/PN/2013 ITA NO.569/PN/2013 2. IN THE APPEAL OF THE ASSESSEE, THE FOLLOWING GRO UNDS OF APPEAL HAVE BEEN RAISED :- GROUND NO. 1:- 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT I SSUING THE SHOW CAUSE NOTICE TO THE APPELLANT INDICATING HIS INTENTION TO CHANGE THE BASIS OF TAXATION BY REJECTING THE REASONS ADVANCED BY THE LEARNED AS SESSING OFFICER, WHICH HAS RESULTED IN ENHANCING THE ASSESSED INCOME. THIS ACTION OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), OF NOT GIVING A REASONABLE OPPORTUNITY OF BEING HEARD, IS BAD IN LAW, AND NEED S TO BE QUASHED.' WITHOUT PREJUDICE TO ABOVE GROUNDS YOUR APPELLANT W ISHES TO TAKE THE FOLLOWING GROUNDS ON MERIT. GROUND NO. 2:- 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN TREAT ING THE AGREEMENT TO SALE TRANSACTION WITH M/S.GHATGE PATIL TRANSPORTS L TD, AS SALE TRANSACTION, BY INCORRECTLY APPLYING THE PRINCIPLES OF AS-9, AND FU RTHER ERRED IN TREATING THE ADVANCE OF RS.1,50,00,000/- AS INCOME OF THE APPELL ANT. ' GROUND NO. 3:- 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT A LLOWING THE PROPORTIONATE EXPENDITURE OF WIP PERTAINING TO ALLEGED SALE TRANS ACTION TO M/S GHATGE PATIL TRANSPORTS LTD.' GROUND NO. 4:- 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LOWER AUTHORITIES ERRED IN TREATING THE INCOME FROM HOUSE PROPERTY AS INCOME FROM BUSINESS /PROFESSION BY DISREGARDING APPELLANT'S CO NTENTION IN THIS REGARD. 3. IN THE CROSS-APPEAL OF THE REVENUE, THE FOLLOWIN G GROUNDS OF APPEAL HAVE BEEN RAISED :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN GRANTING RELIEF TO THE ASSESSEE OF RS.40 LAKHS IN RESPECT OF THE AGREEMENT TO SALE ENTERED INTO WITH GHATGE PATIL TRANSPORT LTD. AT RS .1.90 CRORES. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE IS FOLLOWIN G MERCANTILE METHOD OF ACCOUNTING AND ONCE THE TRANSACTION IS RECOGNIZED A S SALE, THE ENTIRE CONSIDERATION OF THE TRANSACTION IS REQUIRED TO BE INCLUDED IN THE SALES FOR THE F.Y. 2008-09 RELEVANT TO A.Y. 2009-10 IN TERMS OF T HE MERCANTILE METHOD OF ACCOUNTING. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN APPLYING ACCOUNTING STANDARD AS-7 APPLICABLE TO CONSTRUCTION CONTRACTS IN THE CASE OF THE ASSESSEE FOR THE TRANSACTION ENTERED INTO WITH GHATGE PATIL TRANSPORT LTD., ITA NO.118/PN/2013 ITA NO.569/PN/2013 AS THE ASSESSEE IS BUILDER AND DEVELOPER AND NOT A CONTRACTOR AS PER THE FACTS OF THE CASE. 4. IN BRIEF, THE RELEVANT FACTS ARE THAT ASSESSEE I S A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CIVIL CONTRACTORS, BUILD ERS AND DEVELOPERS. FOR THE ASSESSMENT YEAR 2009-10, IT FILED A RETURN OF I NCOME DECLARING TOTAL INCOME OF RS.1,10,10,670/-, WHICH WAS SUBJECT TO A SCRUTIN Y ASSESSMENT. IN THE ASSESSMENT FINALIZED U/S 143(3) OF THE ACT, THE ASS ESSING OFFICER DETERMINED THE TOTAL INCOME AT RS.1,98,78,010/- AFTER MAKING C ERTAIN ADDITIONS/DISALLOWANCES. THE GROUNDS OF APPEAL RAI SED IN THE RESPECTIVE APPEALS REVOLVES AROUND AN ADDITION OF RS.84,30,339 /- MADE BY THE ASSESSING OFFICER. 5. IN THE CAPTIONED PROCEEDINGS, PRIMARILY TWO ISSU ES ARE INVOLVED. THE FIRST ISSUE PERTAINS TO A TRANSACTION BETWEEN ASSES SEE AND GHATGE PATIL TRANSPORTS LTD. AND THE SECOND ISSUE RELATES TO THE RENTALS RECEIVED BY THE ASSESSEE FROM RUPEE CO-OPERATIVE BANK LTD.. A BRIE F BACKGROUND AND THE MANNER IN WHICH THE DISPUTE HAS REACHED THE TRIBUNA L CAN BE SUMMARIZED AS FOLLOWS. 6. THE ASSESSEE WAS ENGAGED IN DEVELOPMENT OF A BUI LDING STYLED AS ASIAD CHAMBERS AT LAXMIPURI, KOLHAPUR. THE ASSES SEE WAS ENGAGED IN THE DEVELOPMENT OF PROPERTY IN TERMS OF A DEVELOPMENT A GREEMENT WITH THE OWNERS OF THE LAND DATED 19.07.1999. THE ASSESSEE HAD OBTAINED SANCTION TO DEVELOP THE PROPERTY COMPRISING OF GROUND FLOOR, FI RST FLOOR AND SECOND FLOOR. A PARTIAL COMPLETION CERTIFICATE WAS ISSUED BY THE KO LHAPUR MUNICIPAL CORPORATION (KMC) ON 13.07.2001 WHEREBY CONSTRUCTIO N OF THE BASEMENT, GROUND FLOOR AND FIRST FLOOR WAS COMPLETED AND THE SECOND FLOOR OF THE BUILDING WAS INCOMPLETE. OUT OF THE CONSTRUCTED AREA, A POR TION OF THE GROUND FLOOR WAS RENTED-OUT TO RUPEE CO-OPERATIVE BANK LTD.. ASSESS EE HAD ALSO OBTAINED ITA NO.118/PN/2013 ITA NO.569/PN/2013 FINANCE FROM RUPEE CO-OPERATIVE BANK LTD. IN ORDER TO FINANCE THE SAID PROJECT. THE BANK WAS ADJUSTING THE RENT PAYABLE T O THE ASSESSEE TOWARDS OUTSTANDING AMOUNT OF LOAN. IT TRANSPIRES THAT ASS ESSEE HAD SOUGHT INCREASE IN RENT FROM THE BANK AND THE BANK AGREED TO PAY AR REARS OF RS.1,41,51,216/- DURING THE YEAR UNDER CONSIDERATION ALONG WITH ANNU AL RENT OF RS.9,48,300/-. THUS, IN THE YEAR UNDER CONSIDERATION, TOTAL AMOUNT OF RENT RECEIVED FROM BANK AGGREGATED TO 1.50.99.516/- WHICH INCLUDED THE ARRE ARS OF THE PAST YEARS ALSO. THIS INCOME WAS OFFERED TO TAX AS INCOME FROM HOUSE PROPERTY. THIS IS THE FIRST AREA OF DISPUTE BEFORE US INASMUCH AS THE ASS ESSING OFFICER AS WELL AS THE CIT(A) HAVE DISAGREED WITH THE ASSESSEE WITH RE GARD TO THE TREATMENT OF RENT RECEIVED FROM RUPEE CO-OPERATIVE BANK LTD. AS INCOME FROM HOUSE PROPERTY. AS PER THE ASSESSING OFFICER AS WELL AS THE CIT(A), THE SAID INCOME WAS LIABLE TO BE TAXED AS BUSINESS INCOME. 7. FURTHER, WHATEVER PORTION OF THE BUILDING THAT W AS COMPLETED, ASSESSEE WAS CARRYING IT AS A PART OF WORK-IN-PROGRESS IN TH E BALANCE SHEET SINCE EARLIER YEARS. SOME OF THE CONSTRUCTED PORTION OF THE GROUND FLOOR WAS ALSO GIVEN TO THE LANDLORDS AND THE ERSTWHILE TENANTS AS COMPENSATION. THE PORTION OF THE GROUND FLOOR RETAINED BY ASSESSEE AS WELL AS INCOMPLETE SECOND FLOOR WAS SHOWN AS WORK-IN-PROGRESS AND NOT TRANSFERRED T O FIXED ASSETS IN THE BALANCE SHEET. ON 31.03.2009 ASSESSEE ENTERED INTO AN AGREEMENT TO SELL WITH GHATGE PATIL TRANSPORT LTD. FOR SALE OF SECOND FLOOR OF THE PROPERTY FOR A CONSIDERATION OF RS.1,90,00,000/- OUT OF WHICH 1,50 ,00,000/- WAS RECEIVED IMMEDIATELY ON EXECUTION OF THE AGREEMENT TO SELL. THE BALANCE AMOUNT WAS PAYABLE ON FULFILLMENT OF CERTAIN CONDITIONS PRESCR IBED IN THE AGREEMENT TO SELL. THE ASSESSEE HAD SHOWN THE AMOUNT OF RS.1,50,00,000 /- AS AN ADVANCE IN ITS BALANCE SHEET. THE ASSESSING OFFICER TREATED THE E NTIRE AMOUNT STATED IN THE AGREEMENT TO SELL OF RS.1,90,00,000/- AS ASSESSEES INCOME FROM BUSINESS. THE ASSESSING OFFICER REDUCED AN AMOUNT OF RS.1,05, 69,661/- (THE AMOUNT OF ITA NO.118/PN/2013 ITA NO.569/PN/2013 INCOME UNDER THE HEAD HOUSE PROPERTY FROM RENTALS COMPUTED BY THE ASSESSEE) FROM RS.1,90,00,000/- AND ARRIVED AT A FI GURE OF RS.84,30,339/- WHICH WAS ADDED TO THE RETURNED INCOME. THE CIT(A) HAS DIFFERED WITH THE ASSESSING OFFICER FOR TREATING THE ENTIRE AMOUNT OF RS.1,90,00,000/- STIPULATED AS CONSIDERATION PAYABLE BY GHATGE PATIL TRANSPORT LTD. TO BE THE INCOME ASSESSABLE FOR THE YEAR UNDER CONSIDERATION. THE C IT(A) AGREED TO THE ASSESSING OFFICERS STAND THAT THE ASSESSEE WAS NOT JUSTIFIED IN TREATING RS.1,50,00,000/- ACTUALLY RECEIVED FROM GHATGE PATI L TRANSPORT LTD. AS AN ADVANCE. AS PER THE CIT(A) ALSO, THE SAID AMOUNT W AS TO BE TREATED AS INCOME, AS DONE BY THE ASSESSING OFFICER. HOWEVE R, HE TREATED INCOME TO THE EXTENT OF RS.1,50,00,000/- AS AGAINST RS.1,90,0 0,000/- CONSIDERED BY THE ASSESSING OFFICER. CONSEQUENTLY, THE CIT(A) ALSO A GREED WITH THE ASSESSEE THAT THE TWO TRANSACTIONS, NAMELY, RENT RECEIVED FR OM RUPEE CO-OPERATIVE BANK LTD. AND THE RECEIPTS FROM GHATGE PATIL TRANSP ORT LTD. HAVE TO BE TREATED SEPARATELY. AGAINST THE DECISION OF THE CIT(A) IN TREATING THE TWO TRANSACTIONS SEPARATELY THERE IS NO GRIEVANCE BROUGHT OUT BY THE REVENUE IN ITS GROUNDS OF APPEAL. IN THE APPEAL OF THE REVENUE, THE PRIMARY DISPUTE IS THAT THE CIT(A) ERRED IN GRANTING RELIEF TO THE ASSESSEE TO THE EXT ENT OF RS.40,00,000/- IN RESPECT OF AGREEMENT TO SELL ENTERED WITH GHATGE PA TIL TRANSPORT LTD. AS RS.1,90,00,000/-. THE ASSESSEE IN ITS APPEAL IS CO NTENDING THAT THE NO REVENUE CAN BE RECOGNIZED IN TERMS OF THE AGREEMENT TO SELL DATED 31.03.2009 AS THE CONVEYANCE DEED OF THE PROPERTY WAS NOT EXEC UTED AND IN-FACT THE SAID AGREEMENT TO SELL WAS EVENTUALLY CANCELLED VIDE A C ANCELLATION DEED DATED 24.09.2010. 8. IN THIS BACKGROUND, THE RIVAL PARTIES WERE HEARD . FIRSTLY, THE GRIEVANCE OF THE ASSESSEE IS THAT THE RENTAL INCOMES EARNED F ROM RUPEE CO-OPERATIVE BANK LTD. HAVE BEEN WRONGLY ASSESSED AS BUSINESS IN COME. IN THIS CONTEXT, THE INCOME-TAX AUTHORITIES NOTED THAT THE SAID RENT AL INCOME WAS SHOWN BY THE ITA NO.118/PN/2013 ITA NO.569/PN/2013 ASSESSEE AS BUSINESS INCOME IN THE FINANCIAL YEAR 2005-06 RELEVANT TO THE ASSESSMENT YEAR 2006-07. IN THE SUBSEQUENT ASSESSM ENT YEARS OF 2007-08 AND 2008-09 AND THE IMPUGNED ASSESSMENT YEAR, ASSES SEE HAD DECLARED SUCH INCOME AS INCOME FROM HOUSE PROPERTY. ON ACCO UNT OF THE ASSESSEE HAVING DECLARED THE SUCH INCOME AS BUSINESS INCOME IN THE ASSESSMENT YEAR 2006-07, THE ASSESSING OFFICER REJECTED ASSESSEES PLEA IN THE CURRENT ASSESSMENT YEAR FOR ASSESSING SUCH INCOME AS INCOM E FROM HOUSE PROPERTY. THE CIT(A) HAS ALSO AFFIRMED THE ACTION OF THE ASSE SSING OFFICER. IT HAS ALSO BEEN POINTED OUT BY THE REVENUE THAT ASSESSEE IS EN GAGED IN THE BUSINESS OF BUILDERS/DEVELOPERS AND THEREFORE THE PROPERTY IN Q UESTION WAS A BUSINESS ASSET AND THEREFORE ANY INCOME THEREFROM INCLUDING RENTAL INCOME IS LIABLE TO BE ASSESSED AS BUSINESS INCOME. 9. ON THE CONTRARY, THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS POINTED OUT THAT IN THE IMMEDIATELY TWO PRECEDING YEARS, AS SESSEE HAD SHOWN RENTAL INCOMES AS INCOME FROM HOUSE PROPERTY AND THAT DE PICTION OF SUCH INCOME AS THE BUSINESS INCOME IN THE ASSESSMENT YEAR 2006-07 WAS OBVIOUSLY A MISTAKE. IN ANY CASE, IT IS POINTED OUT THAT THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF MANGLA HOMES (P) LTD. VS. ITO & ORS., ( 2009) 182 TAXMAN 55 HAS HELD THAT RENTAL INCOME FROM FLATS WHICH HAVE B EEN HELD IN STOCK-IN-TRADE IS ALSO TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY AND NOT AS BUSINESS INCOME. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN THE PRESENT CASE, IT IS QUITE EVIDENT THAT THE BUSINESS OF THE ASSESSEE IS UNDERTAKING ACTIVITY OF BUILDERS/DEVELOPERS. THE CONSTRUCTION OF THE PROPERTY UNDER DEVELOPMENT IS NOT FULLY COMPLETE. OUT OF THE CONS TRUCTED AREA, A PORTION HAS BEEN RETAINED BY THE ASSESSEE WHICH WAS LET OUT TO A BANK. THE RENTAL INCOMES HAVE BEEN OFFERED BY THE ASSESSEE AS INCOM E FROM HOUSE PROPERTY. ITA NO.118/PN/2013 ITA NO.569/PN/2013 THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MANGLA HOMES (P) LTD. (SUPRA) WAS CONSIDERING A SITUATION WHERE ASSESSEE BEING OW NER OF THE FLATS HELD IT AS A STOCK-IN-TRADE. THE RENTAL INCOME FROM LICENSING THE SAID FLAT WAS HELD AS INCOME FROM HOUSE PROPERTY AND NOT AS BUSINESS I NCOME. IN OUR CONSIDERED OPINION, THE FACTUAL MATRIX IN THE PRESENT CASE IS FULLY COVERED BY THE RATIO OF THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN T HE CASE OF MANGLA HOMES (P) LTD. (SUPRA). THEREFORE, THE STAND OF TH E ASSESSEE OF TREATING THE RENTAL INCOME RECEIVED FROM RUPEE CO-OPERATIVE BANK LTD. AS INCOME FROM HOUSE PROPERTY IS LIABLE TO BE AFFIRMED. WE HOLD SO. 11. NO DOUBT, IN ASSESSMENT YEAR 2006-07, ASSESSEE HAS DECLARED SUCH INCOME AS BUSINESS INCOME. IN SUBSEQUENT ASSESSM ENT YEARS 2007-08 AND 2008-09, ASSESSEE HAD DECLARED SUCH INCOME AS INCO ME FROM HOUSE PROPERTY. AT THE TIME OF HEARING, IT WAS ALSO POI NTED OUT WITH REFERENCE TO THE OBSERVATION OF THE CIT(A) IN PARA 15(V) THAT ASSESS EE WAS RECEIVING RENTS FROM RUPEE CO-OPERATIVE BANK LTD. EVEN BEFORE ASSESSMENT YEAR 2006-07 AND IT WAS NOT CLEAR FROM THE RECORDS AS TO HOW THE SAID A MOUNT WAS TREATED FOR THE INCOME-TAX PURPOSES. BE THAT AS IT MAY, IN OUR VIE W, THE MATTER IS LIABLE TO BE DECIDED IN THE CONTEXT OF THE LEGAL POSITION PREVAI LING AT THE TIME OF ITS DETERMINATION. THEREFORE, WE HAVE PROCEEDED TO ADJ UDICATE THE CONTROVERSY ON THE BASIS OF THE JUDGEMENT OF THE HONBLE JURISD ICTIONAL HIGH COURT IN THE CASE OF MANGLA HOMES (P) LTD. (SUPRA). THUS, ON TH IS ASPECT ASSESSEE SUCCEEDS. 12. THE SECOND ISSUE RELATES TO AGREEMENT TO SELL D ATED 31.03.2009 ENTERED BY THE ASSESSEE WITH GHATGE PATIL TRANSPORT LTD.. IN TERMS OF THE SAID AGREEMENT, ASSESSEE CONTRACTED TO SELL SECOND FLOOR OF THE PROPERTY FOR A CONSIDERATION OF RS.1,90,00,000/- OUT OF WHICH RS.1 ,50,00,000/- WAS PAID IMMEDIATELY. THE BALANCE AMOUNT WAS PAYABLE ON FUL FILLMENT OF CERTAIN ITA NO.118/PN/2013 ITA NO.569/PN/2013 CONDITIONS MENTIONED THEREIN. THE ASSESSEE TREATED RS.1,50,00,000/- RECEIVED FROM GHATGE PATIL TRANSPORT LTD. AS AN ADV ANCE AGAINST THE AGREEMENT TO SELL, WHICH WAS SHOWN IN THE BALANCE S HEET. NO INCOME WAS RECOGNIZED FROM THIS TRANSACTION AS ACCORDING TO TH E ASSESSEE, IT WAS MERELY AN ADVANCE AND THAT THE CONVEYANCE DEED FOR THE TRA NSACTED PROPERTY WAS NOT EXECUTED. THE ASSESSING OFFICER TREATED THE TRANSA CTION AS A SALE AND BROUGHT TO TAX THE ENTIRE CONTRACTED CONSIDERATION OF RS.1, 90,00,000/- TO TAX AS INCOME. THE CIT(A) HAS UPHELD ASSESSING OFFICERS STAND THA T INCOME WAS LIABLE TO BE RECOGNIZED QUA THE IMPUGNED TRANSACTION. ASSESSEE S STAND BEFORE THE LOWER AUTHORITIES AS WELL AS BEFORE US IS TO THE EFFECT T HAT NO INCOME CAN BE RECOGNIZED ON THE BASIS OF THE AGREEMENT TO SELL DA TED 31.03.2009 BECAUSE NO SALE DEED WAS EXECUTED. IT HAS ALSO BEEN POINTE D OUT THAT THE AGREEMENT TO SELL WAS INDEED CANCELLED VIDE CANCELLATION DATE D 24.09.2010. IT HAS ALSO BEEN POINTED OUT THAT THE AGREEMENT TO SELL CONTAIN ED A CLAUSE THAT THE BALANCE AMOUNT OF CONSIDERATION WAS PAYABLE ON FULF ILLMENT OF CONDITIONS PRESCRIBED THEREIN. 13. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESE NTATIVE CONTENDED THAT THE EXECUTION OF THE CONVEYANCE OF THE PROPERT Y WAS NEVER THE ESSENCE OF THE AGREEMENT TO SELL AND THEREFORE IT COULD NOT BE SAID THAT THE RECOGNITION OF SALE COULD BE POSTPONED BECAUSE OF LACK OF EXECUTIO N OF SALE DEED. THE LD. DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO THE DIS CUSSION MADE BY THE CIT(A) IN PARA 16 OF THE ORDER IN ORDER TO SUPPORT THE CASE OF THE REVENUE. 14. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. ADMITTEDLY, ASSESSEE IS A BUILDER AND DEVELOPER AND THEREFORE T HE CONSTRUCTED PROPERTY IN QUESTION IS A PART OF ITS STOCK-IN-TRADE. IT IS CA NVASSED BY THE ASSESSEE THAT THE AGREEMENT TO SELL DATED 31.09.2009 DID NOT ENVI SAGE HANDING-OVER POSSESSION OF THE CONSTRUCTED PROPERTY AND NOR DID IT INVOLVE EXECUTION OF A ITA NO.118/PN/2013 ITA NO.569/PN/2013 SALE DEED. IT HAS BEEN CONTENDED THAT THE BUSINESS DEAL IN RESPECT OF THE AGREEMENT TO SELL WAS TO BE COMPLETED ONLY WHEN ASS ESSEE EXECUTED A SALE- DEED AND THEREFORE DURING THE YEAR UNDER CONSIDERAT ION THE AMOUNT OF RS.1,50,00,000/- RECEIVED OUT OF THE TOTAL CONSIDER ATION OF RS.1,90,00,000/- WAS TREATED AS AN ADVANCE ONLY. MOREOVER, IT IS AL SO UNDISPUTEDLY CANVASSED BY THE ASSESSEE THAT THE SAID AGREEMENT TO SELL WAS CANCELLED VIDE CANCELLATION DATED 24.09.2010. FACTUALLY SPEAKING, IT IS QUITE EVIDENT THAT THE AGREEMENT TO SELL DATED 31.03.2009 DOES NOT ENVISAG E GIVING OF POSSESSION TO THE OTHER PARTY. IT IS ALSO UNDISPUTED THAT THE SA LE DEED HAS NOT BEEN EXECUTED DURING THE YEAR UNDER CONSIDERATION. UNDER THESE C IRCUMSTANCES, THE MOOT QUESTION IS AS TO WHETHER IT CAN BE SAID THAT THE S ALE TRANSACTION WAS COMPLETE SO AS TO REQUIRE THE ASSESSEE TO ACCOUNT FOR SUCH S ALE PROCEEDS AS A PART OF ITS INCOME. 15. IN THIS CONTEXT, A REFERENCE HAS BEEN MADE TO T HE JUDGEMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. A SHALAND CORPORATION, (1982) 133 ITR 55 (GUJ). IN THE CASE BEFORE THE HO NBLE HIGH COURT, ASSESSEE, A DEALER IN LAND, ENTERED INTO AN AGREEME NT WITH A HOUSING SOCIETY TO SELL CERTAIN PLOTS OF LAND. ASSESSEE RECEIVED E ARNEST MONEY AND A PART OF THE SALE PRICE AND HANDED-OVER POSSESSION OF THE PL OTS AGREED TO BE SOLD DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR 197 1-72. ASSESSEE OFFERED THE NET PROFIT DERIVED FROM THE RECEIPTS AS ITS INC OME FOR THE SAME ASSESSMENT YEAR. THE AFORESAID POSITION WAS ACCEPTED BY THE A SSESSING OFFICER BUT SUCH ACTION WAS CONSIDERED AS ERRONEOUS BY THE COMMISSIO NER BY INVOKING SECTION 263(1) OF THE ACT. AS PER THE COMMISSIONER, THE SA LE PROCEEDS OUGHT TO HAVE BEEN TREATED AS TRADING INCOME ONLY FOR THE YEAR IN WHICH THE SALE WAS FINALIZED WHICH WAS THE SUBSEQUENT ASSESSMENT YEAR OF 1972-73. THE HONBLE HIGH COURT UPHELD THE STAND OF THE COMMISSIONER AND HELD THAT THE BUSINESS DEAL IN QUESTION WOULD BE TAKEN AS COMPLETE ONLY WH EN THE ASSESSEE ITA NO.118/PN/2013 ITA NO.569/PN/2013 EXECUTED A SALE DEED. AS PER THE HONBLE HIGH COUR T, IT WAS ONLY ON COMPLETION OF SALE TRANSACTION THAT ASSESSEE COULD BE SAID TO HAVE EARNED PROFIT OR SUFFERED A LOSS, AND THAT THE RECEIPT OF EARNEST MONEY AND PART PAYMENT OF PURCHASE PRICE WOULD NOT CONSTITUTE TRA DING RECEIPTS FOR THE ASSESSMENT YEAR IN WHICH THEY WERE ACTUALLY RECEIVE D. THE HONBLE HIGH COURT FOUNDED ITS JUDGEMENT ON THE PRINCIPLE THAT U NLESS THE TITLE OF THE ASSESSEE IS EXTINGUISHED, THE TITLE TO THE PURCHASE R CANNOT ARISE. 16. CONSIDERED IN THE LIGHT OF AFORESAID LEGAL POSI TION, IN THE PRESENT CASE, IT IS QUITE CLEAR THAT THE AGREEMENT TO SELL DATED 31. 03.2009 DOES NOT EXTINGUISH THE TITLE OF THE ASSESSEE TO THE IMPUGNED PROPERTY AND THEREFORE IT COULD NOT BE SAID THAT THE SALE TRANSACTION ENVISAGED THEREIN WA S COMPLETE DURING THE YEAR UNDER CONSIDERATION. MOREOVER, IT IS AN UNDISPUTED POSITION THAT THE AGREEMENT TO SELL DATED 31.03.2009 WAS ACTUALLY CAN CELLED VIDE CANCELLATION DEED DATED 24.09.2010. OF-COURSE, THE CANCELLATION DEED IS AFTER THE CLOSE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR U NDER CONSIDERATION BUT IT IS A FUNDAMENTAL FACT WHICH ALSO CANNOT BE LOST SIGHT OF. PERTINENTLY, AT THE TIME OF ASSESSMENT PROCEEDINGS, THE FACTUM OF AGREEMENT TO SELL HAVING BEEN CANCELLED VIDE CANCELLATION DEED DATED 24.09.2010 W AS VERY MUCH BEFORE THE ASSESSING OFFICER. IN VIEW OF THE AFORESAID DISCUS SION, WE THEREFORE FIND NO REASON TO UPHOLD THE CONCLUSION OF THE CIT(A) THAT THE AMOUNT RECEIVED BY THE ASSESSEE IN TERMS OF THE AGREEMENT TO SELL DATED 31 .03.2009 WITH GHATGE PATIL TRANSPORT LTD. WAS TAXABLE AS BUSINESS INCOME FOR THE YEAR UNDER CONSIDERATION. THUS, ASSESSEE SUCCEEDS ON THIS ISS UE. 17. CONSEQUENT TO OUR AFORESAID DECISION, THE OTHER POINT IN DISPUTE RELATING TO THE ACTION OF THE CIT(A) IN TREATING ONLY A SUM OF RS.1,50,00,000/- AS INCOME AS AGAINST THE ACTION OF THE ASSESSING OFFIC ER IN TREATING THE ENTIRE CONTRACTED CONSIDERATION OF RS.1,90,00,000/- AS INC OME IS RENDERED ACADEMIC. ITA NO.118/PN/2013 ITA NO.569/PN/2013 18. IN THE RESULT, WE SET-ASIDE THE ORDER OF THE CI T(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW APPROPRIATE RELIEF ON TH IS ASPECT. APART FROM THE AFORESAID, NO OTHER SPECIFIC PLEA HAS BEEN RAISED B Y THE ASSESSEE QUA OTHER GROUNDS OF APPEAL. 19. RESULTANTLY, WHEREAS THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 28 TH JANUARY, 2015. SD/- SD /- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 28 TH JANUARY, 2015. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), KOLHAPUR; 4) THE CIT, KOLHAPUR; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE
