The ITO, Ward-1(1)(2), Ahmedabad V. Balaji Electrical Insulators Pvt. Ltd., Ahmedabad

ITA 73/AHD/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6981 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 11-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Keywords: Capital asset; Business income; Scheme of amalgamation; TDS
• Section: 143(3)

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 73/AHD/2016 ( ASSESSMENT YEAR : 2010-11) I.T.O. WARD - 1(1)(2) A WING, ROOM NO. 302, 3 RD FLOOR, PRATYAKSHA KAR BHAVAN, AMBAWADI, AHMEDABAD - 380015 / VS. M/S. BALAJI ELECTRICAL INSULATORS PVT. LTD., 501, SURMOUNT COMPLEX, OPP. ISKON TEMPLE, S. G. HIGHWAY, SATELLITE, AHMEDABAD 380 015 ./ ./ PAN/GIR NO. : AACCB9879R ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI LALIT P. JAIN, SR. D.R. / RESPONDENT BY : SHRI SAKAR SHARMA, A.R. DATE OF HEARING 30/01/2019 !'# / DATE OF PRONOUNCEMENT 26/04/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS), GANDHINAGAR (CIT(A) IN SHORT), DATED 2 3.10.2015 ARISING IN THE ASSESSMENT ORDER DATED 26.03.2013 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 2010-11. ITA NO. 73/AHD/16 [ITO VS. BALAJI ELECTRICAL INSULATORS PVT. LTD.] A.Y. 2010-11 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO DELETE THE ADDITION OF RS.3,13,18,468/- MADE ON ACCOUNT OF SALE OF LAND, BY WAY OF DEVELOPMENT AGREEMENT. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE DISALLOWANCE OF CONSULTANCY FEES OF RS.4,50,000/- B Y OBSERVING THAT THE ASSESSEE HAS COMPLIED WITH THE TDS PROVISIONS. 3. BRIEFLY STATED, THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF L.T. INSULATORS, SALE/PURCHASE OF LAND AND DEVEL OPMENT OF PROPERTIES. THE ASSESSEE FILED RETURN OF INCOME FO R AY 2010-11 DECLARING TOTAL INCOME AT RS. NIL. THE RETURN FILE D BY THE ASSESSEE WAS SUBJECTED TO SCRUTINY ASSESSMENT. IN THE COURSE OF ASSESSMENT, THE AO DISPUTED THE RETURN OF INCOME AND MADE ADDITION OF RS.3,13,18,468/- AGAINST SALE OF LAND ON THE GROUND THAT THE DEVELOP MENT AGREEMENT EXECUTED BY THE ASSESSEE FOR CERTAIN PARCEL OF LAND HELD BY IT IN FAVOUR OF THE DEVELOPER M/S. BALAJI ASSOCIATES FOR CONSTRU CTION OF RESIDENTIAL/COMMERCIAL UNIT AS TRANSFER UNDER S.2(4 7) OF THE ACT AND THUS CHARGEABLE TO CAPITAL GAIN. THE AO ALSO MADE DISALLOWANCE OF CONSULTANCY FEES AMOUNTING TO RS.4,50,000/- AND ADD ED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). IT WAS VEHEMENTLY CONTENDED WITH REFERENCE TO THE VARI OUS CLAUSES OF THE DEVELOPMENT AGREEMENT THAT THE DEVELOPER DO NOT HAV E ANY DOMAIN OVER THE LAND AND IT IS THE PROSPECTIVE BUYER WHO B UYS SPECIFIED SHARE OF UNDIVIDED INTEREST IN THE LAND FROM THE OWNER AN D THEREFORE NO TRANSFER OF LAND COULD BE CONTEMPLATED FROM THE ASS ESSEE TO THE DEVELOPER. THE ASSESSEE HAS FILED A DETAILED REPLY BEFORE THE CIT(A) WHICH HAS BEEN SUMMARIZED BY THE CIT(A) IN PARA NO. 5.2 OF ITS ORDER AS UNDER: 5.2 DURING THE COURSE OF APPELLATE PROCEEDING IT W AS SUBMITTED BY THE APPELLANT THAT THE (AND WAS ORIGINALLY HELD BY BALA JI CINEVISION (INDIA) ITA NO. 73/AHD/16 [ITO VS. BALAJI ELECTRICAL INSULATORS PVT. LTD.] A.Y. 2010-11 - 3 - PVT LTD. THE SAID COMPANY WAS AMALGAMATED WITH THE APPELLANT COMPANY FROM 01/04/2008 AS PER THE ORDER OF HON'BLE GUJARAT HIGH COURT VIDE ORDER DATED 14TH SEPTEMBER, 2009. APPELLANT SUBMITT ED THAT THE LAND WAS HELD BY BALAJI CINEVISION (INDIA) PVT LTD AS STOCK IN TRADE AND THE APPELLANT HAS ALSO TREATED THE SAME AS STOCK IN TRA DE FROM THE BEGINNING IN THE BOOKS OF ACCOUNTS AS THE LAND BEING RECEIVED IN AMALGAMATION AS PART OF STOCK IN TRADE. THE APPELLANT ARGUED THAT A O HAS ERRED IN APPLYING THE PROVISIONS OF SECTION 2(47) WHILE MAKING ADDITI ON AS SUCH PROVISIONS ARE APPLICABLE TO THE CAPITAL ASSET ONLY AND NOT AS SET HELD AS STOCK IN TRADE. IN THE PRESENT CASE EVEN THE AO HAS WHILE MA KING ASSESSMENT ORDER MADE ADDITION OF THE PROFIT AS BUSINESS PROFIT AND EVEN CONSIDERING THE SAME THE PROVISIONS OF SECTION 2(47) R.W.S 53A OF T HE TRANSFER OF PROPERTY ACT, 1882 APPLIED TO STOCK IN TRADE ARE NOT JUSTIFI ED. THE APPELLANT ARGUED THAT AS PER TERMS AND CONDITIONS OF THE DEVELOPMENT AGREEMENT THE POSSESSION REMAINS WITH THE APPELLANT AND MERELY DE VELOPMENT RIGHTS ARE TRANSFERRED TO THE APPELLANT. FURTHER, APPELLANT RE FERS TO THE CLAUSE (F) OF THE DEVELOPMENT AGREEMENT AND ARGUED THAT AS PER TH E TERMS THE DEVELOPER WAS TO COLLECT PRICE OF LAND AS PER JANTRI RATE AND HAND OVER THE SAME TO THE APPELLANT FROM TIME TO TIME. FURTHER, APPELLANT SUBMITTED THAT AS PER CONDITION 2 OF DEVELOPMENT AGREEMENT CONSIDERATION OF RS.1 CRORE IS TO BE PAID AS AND WHEN THE WORK IS PROGRESSED. APPELLANT REFEREED TO THE CLAUSE 5 OF DEVELOPMENT AGREEMENT AND ARGUED THAT SALE DEE D IS TO BE EXECUTED BY THE APPELLANT IN FAVOUR OF PROPOSED MEMBERS AND HEN CE THE CONTENTION OF THE AO THAT THE PROPERTY HAS BEEN TRANSFERRED BY TH E APPELLANT ON EXECUTION OF DEVELOPMENT AGREEMENT IS NOT JUSTIFIED . FURTHER THE CONSIDERATION OF RS.2.86 CRORE AS PER JANTRI VALUE IS TO BE RECEIVED IN FUTURE AND NOT ON EXECUTION OF AGREEMENT AND ACCORD INGLY THERE IS NO JUSTIFICATION FOR TAXING SALE CONSIDERATION OF RS.2 .86 CRORE AS MADE IN THE ASSESSMENT ORDER. APPELLANT SUBMITTED THAT AS PER D EVELOPMENT AGREEMENT THE APPELLANT HAS BOOKED SALE VALUE OF LAND IN THE PROFIT AND LOSS ACCOUNT AS AND WHEN THE UNITS ARE BOOKED IN FAVOUR OF PROPO SED PURCHASER AND ACCORDINGLY IT HAS SHOWN THE TOTAL SALE VALUE OF RS .3,22,83,698/- IN DIFFERENT YEAR WHICH IS MORE THAN JANTRI RATE OF RS .2,86,02,600/- AS ADOPTED BY AO ON THE BASIS OF DEVELOPMENT AGREEMENT . 5. THE CIT(A) ON CONSIDERATION OF SUBMISSIONS MADE ADJUDICATED THE ISSUE IN FAVOUR OF THE ASSESSEE AS UNDER: 5.3 I HAVE CAREFULLY CONSIDERED ARGUMENT OF THE APPELLANT AND OBSERVATION OF AO MADE IN THE ASSESSMENT ORDER. THE AO HAS WHILE PASSING ASSESSMENT ORDER MADE ADDITION AS PROFIT ON SALE OF LAND APPLYING PROVISIONS OF SECTION 2(47) R.W.S 53A OF TRANSFER O F PROPERTIES ACT, 1882 ON THE GROUND THAT THE APPELLANT HAS TRANSFERRED PO SSESSION OF LAND BY MAKING DEVELOPMENT AGREEMENT APPELLANT HAS DURING T HE COURSE OF APPELLATE PROCEEDING EXPLAINED THE TERMS OF DEVELOP MENT AGREEMENT IN DETAILS AND SUBMITTED THAT THERE IS NO TRANSFER OF POSSESSION OF LAND AS HELD IN THE ASSESSMENT ORDER AND FURTHER EMPHASIS O N THE ARGUMENT THAT THE LAND BEING HELD AS STOCK IN TRADE THE PROVISION S OF SECTION 2(47) OF THE ACT ARE NOT APPLICABLE AS THE SAME ARE RELATED TO T HE CAPITAL ASSET. ON CAREFUL CONSIDERATION OF FACTS OF THE CASE AND SUBM ISSION OF THE APPELLANT IT IS OBSERVED AS UNDER: ITA NO. 73/AHD/16 [ITO VS. BALAJI ELECTRICAL INSULATORS PVT. LTD.] A.Y. 2010-11 - 4 - (I) THE CONTENTION OF THE AO WHILE PASSING ASSESSME NT ORDER WAS THAT THAT THE POSSESSION OF THE LAND WAS TRANSFERRE D TO THE DEVELOPER AS PER THE DEVELOPMENT AGREEMENT AS ALL T HE RIGHTS TOWARDS CONSTRUCTION OF LAND WERE TRANSFERRED TO TH E DEVELOPER AND FURTHER THE DEVELOPER WAS GIVEN THE R IGHT TO DECIDE THE PROSPECTIVE BUYERS. ALL THE RIGHTS TO DE CIDE TERMS AND CONDITIONS WITH THE PROSPECTIVE BUYERS AND ALSO RIGHT TO DECIDE THE FINAL SALE PRICE OF FLATS SOLD WAS TRANS FERRED TO THE APPELLANT AND BASED ON THAT THE AO CONTENDED THAT T HE APPELLANT HAS TRANSFERRED THE CAPITAL ASSET. THE AP PELLANT HAS DURING THE COURSE OF APPELLATE PROCEEDING EXPLA INED THE TERMS AND CONDITIONS OF DEVELOPMENT AGREEMENT IN DE TAIL AND THE COPY OF WHICH WAS AVAILABLE WITH AO WHILE PASSI NG ASSESSMENT ORDER. ON CONSIDERATION OF ENTIRE FACTS IT IS OBSERVED THAT THE DEVELOPER IS GIVEN AUTHORITY TO C ONSTRUCT THE FLATS ON THE LAND AND FINALIZE THE BUYERS FOR T HE SUCH FLAT AS WELL AS AUTHORITY TO DECIDE TERMS OF SALE PRICE WITH THE BUYERS. HOWEVER IT IS PERTINENT TO NOTE THAT CLAUSE 5 OF THE DEVELOPMENT AGREEMENT CLEARLY STATE THAT THE SALE D EED IS TO BE EXECUTED BY THE APPELLANT IN FAVOUR OF PROPOSED MEMBERS. THUS FROM THIS CONDITIONED IT IS CLEAR THAT THE APP ELLANT HAS MERELY TRANSFERRED THE DEVELOPMENT RIGHTS IN LAND T O BALAJI ASSOCIATES AND NOT THE POSSESSION OF LAND AS THE FI NAL AUTHORITY TO SIGN THE SALE DEED MADE WITH PROSPECTI VE BUYERS REMAINS WITH THE APPELLANT WHICH PROVES THAT THE OW NERSHIP IS STILL REMAINS WITH APPELLANT. (II) THE AO HAS WHILE PASSING ASSESSMENT ORDER APPL IED PROVISIONS OF SECTION 2(47)(V) OF THE INCOME TAX AC T AND ACCORDINGLY CONTENDED THAT AS THE LAND IN QUESTION IS TRANSFERRED TO THE DEVELOPER THE ENTIRE CONSIDERATI ON IS REQUIRED TO BE OFFERED TO TAX IN VIEW OF PROVISIONS OF SECTION 2(47) R.W.S 53A OF TRANSFER OF PROPERTIES ACT, 1882 . ON CONSIDERATION OF ENTIRE FACTS OF THE CASE OF THE AP PELLANT IT IS OBSERVED THAT THE APPELLANT HAS TREATED THE LAND AS STOCK IN TRADE FROM THE BEGINNING. THE LAND WAS ACQUIRED BY THE APPELLANT FROM BAIAJI GNEVISION (INDIA) PVT LTD IN VIEW OF THE SCHEME OF AMALGAMATION AND THE SAME WAS TREATED AS STOCK IN TRADE BY THE APPELLANT. THUS THE LAND IN Q UESTION BEING PART OF STOCK IN TRADE THE ARGUMENT OF THE AP PELLANT IS FOUND TO BE ACCEPTABLE. THE PROVISIONS OF SECTION 2 (47) ARE APPLICABLE ONLY TO THE CAPITAL ASSET. IN THE PRESEN T CASE OF THE APPELLANT LAND FOR DEVELOPMENT AGREEMENT IS HEL D AS STOCK IN TRADE BY THE APPELLANT AND HENCE THE PROVI SIONS OF SECTION 2(47) OF THE ACT BECOMES IRRELEVANT. (III) THE AO HAS WHILE PASSING ASSESSMENT ORDER ERR ED IN CONSIDERING SALE VALUE OF RS.3,86,02,600/- AS PER DEVELOPMENT AGREEMENT AS FULL VALUE OF CONSIDERATIO N RECEIVED AND ACCORDINGLY OBSERVED THAT THE APPELLAN T IS REQUIRED TO TAX ENTIRE PROFIT ON SALE OF LAND AS TH E POSSESSION OF LAND IS TRANSFERRED TO DEVELOPER. ON CONSIDERATI ON OF ENTIRE FACTS IT IS OBSERVED THAT AS PER CLAUSE (F) OF THE DEVELOPMENT AGREEMENT THE APPELLANT IS REQUIRED TO COLLECT PRICE OF LAND FROM DEVELOPER AS PER JANTRI RATE FRO M TIME TO ITA NO. 73/AHD/16 [ITO VS. BALAJI ELECTRICAL INSULATORS PVT. LTD.] A.Y. 2010-11 - 5 - TIME AS AND WHEN THE CONSTRUCTION IS COMPLETED. FUR THER AS PER CONDITION 2 OF DEVELOPMENT AGREEMENT CONSIDERAT ION OF RS.1 CRORE IS TO BE PAID AS AND WHEN THE WORK IS PR OGRESSED. THUS THE APPELLANT WAS AUTHORIZED TO COLLECT THE CONSIDERATION FROM TIME TO TIME AS AND WHEN THE CON STRUCTION IS COMPLETED BY THE DEVELOPER. FURTHER IT IS PERTIN ENT TO CONSIDER HERE SCHEDULE: 22 NOTES FORMING PART OF ACCOUNTS WHEREIN RECOGNITION OF REAL ESTATE DEVELOPMENT INCOME IS SPECIFIED TO BE RECOGNIZED ON THE BASIS OF TERMS AN D CONDITIONS AS LAID DOWN IN AGREEMENT BETWEEN THE SE LLER AND DEVELOPER AND ACCORDINGLY THE APPELLANT HAS CORRECT LY POSTPONED RECOGNITION OF REVENUE ON THE BASIS OF CO MPLETION OF WORK BY THE DEVELOPER AS THE SAME WAS NOT DETERM INABLE WITH REASONABLE CERTAINTY TILL THE CONSTRUCTION OF FLAT BY THE DEVELOPER. THE CASE OF THE APPELLANT IS SQUARELY CO VERED BY THE DECISION OF HYDERABAD TRIBUNAL IN CASE OF DCIT VS. S.P. REAL ESTATE DEVELOPERS (P.) LTD [2014] 47 TAXMANN.COM 281 I. SECTION 5 OF THE INCOME-TAX ACT, 1961 - INCOME - ACCRUAL OF (CONCEPT OF REAL INCOME) - ASSESSMENT YE AR 2008-09 - ASSESSEE-COMPANY ENGAGED IN BUSINESS OF DEVELOPMENT AND SALE OF REAL ESTATE HAD TAKEN UP A REAL ESTATE DEVELOPMENT PROJECT - ASSESSING OFFICER TREATED DEVELOPMENT AGREEMENT AS A TRANSACTION GIVING RISE TO ACCRUED INCOME OF SALE OF FUTURE PROPERTY - COMMISSIONER (APPEALS) DELETED ADDITION MADE BY ASSESSING OFFICER ON GROUND THAT THERE WAS A DISPUTE WITH REGARD TO RIGHT OVER LAND AND CONSTRUCTION AND THAT NO REAL INCOME HAD ACCRUED TO ASSESSEE - IT WAS OBSERVED THAT NEITHER POSSESSION OF PROPERTY HAD BEEN GIVEN TO ULTIMATE BUYER, NOR ASSESSES HAD RECEIVED ANY, SUBSTANTIAL CONSIDERATIO N AGREEMENT ENTERED INTO BY ASSESSEE HEREIN WAS ONLY FOR SALE OF PIECE OF PROPERTY AND SALE WOULD TAKE P LACE ONLY AFTER COMPLETION OF CONSTRUCTION AND AFTER ASSESSEE'S SHARE OF PROPERTY WAS IDENTIFIED - WHETH ER, LOOKING AT PREVAILING CIRCUMSTANCES IN INSTANT CASE , IT WAS NOT POSSIBLE TO HOLD THAT INCOME HAD ACTUALLY ACCRUED TO ASSESSEE - HELD, YES - WHETHER WHEN CONSIDERATION WAS NOT DETERMINABLE WITH REASONABLE CERTAINTY, ASSESSEE WAS JUSTIFIED IN POSTPONING RECOGNITION OF INCOME AND IT WAS APPROPRIATE TO RECOGNISE INCOME ONLY WHEN IT WAS REASONABLY CERTAI N THAT ULTIMATE REALISATION WAS POSSIBLE - HELD, YES - WHETHER THUS, THERE WAS. NO INFIRMITY IN ORDER OF COMMISSIONER (APPEALS) AND SAME WAS TO BE CONFIRMED - HELD, YES [PARAS 43 & 46] [IN FAVOUR OF ASSESSEE] (IV) AS PER THE CLAUSE (F) OF DEVELOPMENT AGREEMENT THE APPELLANT WAS AUTHORIZED TO COLLECT PRICE OF LAND AS PER JANT RI RATE AND HAND OVER THE SAME TO THE APPELLANT FROM TIME T O TIME. THUS IN VIEW OF TERMS OF AGREEMENT THE APPELLANT HA S CORRECTLY TAXED CONSIDERATION OF DEVELOPMENT AGREEM ENT ON ITA NO. 73/AHD/16 [ITO VS. BALAJI ELECTRICAL INSULATORS PVT. LTD.] A.Y. 2010-11 - 6 - PROPORTIONATE BASIS AS AND WHEN THE SALE DEED IS EX ECUTED IN FAVOUR OF PROPOSED BUYERS AS THE TRANSFER OF PROPOR TIONATE LAND TOOK PLACE ONLY WHEN THE APPELLANT TRANSFERS T HE CONSTRUCTED PROPERTY/ FLAT BY WAY OF SALE DEED. THE ARGUMENT OF THE APPELLANT IS SQUARELY COVERED BY THE DECISIO N OF HON'BLE CHENNAI TRIBUNAL IN CASE OF R. GOPINATH (HU F) V. ASSISTANT COMMISSIONER OF INCOME-TAX [2010] 133 TTJ 595(CHENNAI) 'HELD THAT THE POSSESSION WAS HANDED OVER FOR CARRYING OUT THE; CONSTRUCTION WORK BY THE DEVELOPE R AND THERE WAS NO OTHER DOCUMENT EXCEPT THE DEVELOPMENT AGREEMENT WHICH TRANSFERRED THE TITLE O F THE-PROPERTY TO THE DEVELOPER. IN THE ABSENCE OF TH E TRANSFER OF THE TITLE OF THE PROPERTY AND ANY CONSIDERATION AT THE TIME OF DEVELOPMENT AGREEMENT, THE HANDING OVER OF THE POSSESSION WAS MERELY A TEMPORARY MEASURE (OR CARRYING OUT THE CONSTRUCTION WORK BY THE DEVELOPER AND THE EXCLUSIVE POSSESSION OF THE PROPERTY IN LEGAL SENSE REMAINED WITH THE ASSES SEE WHICH WAS FINALLY HANDED OVER AT THE TIME OF EXECUT ION OF THE SALE DEED OF THE CONSTRUCTED FLATS BY THE ASSESSES, THE ASSESSEE HAD EXECUTED ALL THE SALE DE EDS FOR TRANSFER OF THE CONSTRUCTED APARTMENTS IN FAVOU R OF THE END USER/PURCHASER, THEREFORE, THE TRANSFER OF THE PROPORTIONATE LAND TOOK PLACE ONLY WHEN THE ASSESSE E TRANSFERRED THE CONSTRUCTED PROPERTY BY WAY OF SALE DEEDS AND OFFERED THE BUSINESS INCOME WHICH WAS ACCEPTED BY THE DEPARTMENT. IN ANY CASE, WHEN THE ASSESSEE HAD RETAINED THE PORTION OF THE LAND BEING PROPORTIONATE TO THE CONSTRUCTED AREA TO BE RETAINE D BY THE ASSESSEE, THEN THERE WAS NO QUESTION OF TRAN SFER OF THE ENTIRE LAND TO THE DEVELOPER. THEREFORE, CAPITAL GAIN ARISING FROM THE CONVERSION OF THE LAND AND BUILDING INTO STOCK-IN-TRADE WOULD BE TAXED PROPORTIONATELY IN THE PREVIOUS YEARS IN WHIC H THE CONSTRUCTED PROPERLY WAS SOLD BY THE ASSESSEE O R RETAINED FOR SELF-USE AND CORRESPONDING BUSINESS INCOME WAS OFFERED. (V) THUS, IN VIEW OF ABOVE IT IS HELD THAT THE APPE LLANT HAS CORRECTLY RECOGNIZED REVENUE ON YEAR TO YEAR. O N PERUSAL OF DETAILS SUBMITTED BY THE APPELLANT IT IS APPRECI ATED THAT APPELLANT HAS DULY OFFERED THE INCOME FROM PROFIT O N SALE LAND TO TAX WHICH IS MORE THAN THE INCOME AS SPECIF IED IN THE DEVELOPMENT AGREEMENT: ASS.YEAR LAND SALE PROFIT TOTAL SALE 2009-10 27,58,377 30,25,755 57,84,132 2010-11 6,90,060 75,69,580 14,47,010 2011-12 89,48,903 98,16,349 1,87,65,252 2012-13 12,42,866 50,44,438 62,87,304 ITA NO. 73/AHD/16 [ITO VS. BALAJI ELECTRICAL INSULATORS PVT. LTD.] A.Y. 2010-11 - 7 - 1,36,40,206 1,86,43,492 3,22,83,698 LAND DEVELOPMENT 1,00,00,000 2,86,43,492 THUS FROM THE ABOVE IT IS APPRECIATED THAT APPELLAN T HAS DULY OFFERED SALE VALUE OF LAND IN THE PROFIT AND LOSS A CCOUNT AS AND WHEN THE UNITS ARE BOOKED IN FAVOUR OF PROPOSED BUYERS IN VI EW OF TERMS OF DEVELOPMENT AGREEMENT AND ACCORDINGLY ADDITION OF R S.3,13,18,468/-MADE IN THE ASSESSMENT ORDER TOWARDS UNACCOUNTED PROFIT ON SALE OF LAND APPLYING THE PROVISIONS OF SECTION 2(47)(V) OF-THE ACT ARE DIRECTED TO BE DELETED AND THEREBY THIS GROUND OF APPEAL OF THE AP PELLANT IS ALLOWED. 6. AGGRIEVED, THE REVENUE PREFERRED APPEAL BEFORE T HE TRIBUNAL. 7. THE LEARNED DR FOR THE REVENUE RELIED UPON THE O RDER OF THE AO WHEREAS THE LEARNED AR FOR THE ASSESSEE REFERRED TO SALIENT FEATURES SUBMITTED THAT A BARE READING OF THE VARIOUS CLAUSE S WOULD SHOW THAT THERE WAS NO INTENTION OF ANY TRANSFER OF LAND NOR HAS THE ASSESSEE TRANSFERRED THE LAND IN FAVOUR OF THE DEVELOPER. IT WAS SUBMITTED THAT THE TRANSFER OF THE LAND WILL TAKE PLACE IN FAVOUR OF THE ULTIMATE FLAT PURCHASERS AT A LATER DATE ON FULFILLMENT OF VARIOU S CONDITIONS AND ON RECEIPT OF AGGREGATE CONSIDERATION AS PER THE AGREE MENTS EXECUTED IN THIS REGARD. THE LEARNED AR FOR THE ASSESSEE SUBMI TTED THAT THE DEVELOPER COULD NOT PART WITH THE LAND WITHOUT THE CONCURRENCE AND APPROVAL OF THE ASSESSEE. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. WE FIND THAT THE CIT(A) HAS CORRECTLY APPLIED THE LAW IN TH E FACTS OF THE CASE. AS PER THE TERMS OF THE DEVELOPMENT AGREEMENT, THER E IS NO TRANSFER OF POSSESSION OF LAND AS NOTED BY THE CIT(A). SECONDL Y, THE LAND WAS HELD AS STOCK AND TRADE AND THEREFORE PROVISIONS OF SECTION 2(47) OF THE ACT RELATING TO CAPITAL ASSET WOULD NOT APPLY A T ALL. IT IS SEEN FROM THE ORDER OF THE CIT(A) THAT AS PER THE DEVELOPMENT AGREEMENT, THE ASSESSEE WAS REQUIRED TO COLLECT PRICE OF LAND FROM THE DEVELOPER FROM TIME-TO-TIME WHEN THE CONSTRUCTION IS COMPLETED. T HE CIT(A) HAS ALSO ITA NO. 73/AHD/16 [ITO VS. BALAJI ELECTRICAL INSULATORS PVT. LTD.] A.Y. 2010-11 - 8 - OBSERVED THAT ASSESSEE HAS RECORDED INCOME AS PER A CCOUNTING STANDARD CONCERNING REAL ESTATE DEVELOPMENT. WE DO NOT SEE ANY INFIRMITY IN THE PROCESS OF REASONING ARRIVED AT BY THE CIT(A) A ND CONSEQUENTLY, ENDORSE IT IN ENTIRETY WITHOUT REPEATING THE SAME. 9. IN THE RESULT, GROUND NO.1 OF THE REVENUES APPE AL IS DISMISSED. 10. GROUND NO.2 OF THE REVENUES APPEAL CONCERNS DI SALLOWANCE OF CONSULTANCY CHARGES AMOUNTING TO RS.4,50,000/- PAID BY THE ASSESSEE. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE CIT (A) DEALING WITH THE ISSUE READS AS UNDER: 8.3 I HAVE CAREFULLY CONSIDERED ARGUMENT OF THE AP PELLANT AND OBSERVATION OF AO MADE. AO WHILE PASSING THE ASSESS MENT ORDER MADE ADDITION OF RS.4,50,000/- ON THE GROUND THAT T HE APPELLANT HAS NOT EXPLAINED THE NATURE OF SERVICE PROVIDED BY THE APPELLANT WITH SUPPORTING DOCUMENTS. ON CONSIDERATION OF ENTIRE FA CTS, IT IS OBSERVED THAT THE APPELLANT HAS PAID THE AMOUNT OF RS.4,50,000/- AS CONSULTANCY FEES TO S.S BAID FOR PROVIDING PRODUCTI ON AND TECHNICAL CONSULTANCY. EVEN DURING THE COURSE OF ASSESSMENT P ROCEEDING, APPELLANT HAS PROVIDED COPY OF BILL BASED ON WHICH THE CONSULTANCY FEES IS PAID TO S.S BAID. FURTHER, IT IS APPRECIATE D THAT THE PAYMENT BEING MADE THROUGH BANKING CHANNEL AFTER DUTY COMPL YING WITH THE PROVISIONS OF TDS, NO ADVERSE INFERENCE CAN BE DRAW N PARTICULARLY WHEN AO HAS NOT POINTED OUT ANY INSTANCES OF PAYMEN T BEING MADE FOR OTHER THAN BUSINESS PURPOSE. THUS, ON CONSIDERA TION OF ENTIRE FACTS OF THE CASE OF THE APPELLANT, ADDITION OF RS. 4,50,000/- MADE TOWARDS CONSULTANCY CHARGES ARE HEREBY DELETED AND THEREBY THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED. 11. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE A RE UNABLE TO SEE ANY MERIT IN THE APPEAL OF THE REVENUE. THE CIT(A) HAS NOTED THAT ASSESSEE HAS PROVIDED COPY OF BILLS FOR CONSULTANCY CHARGES PAID TO THE CONSULTANT S. S. BAID. THE ASSESSEE HAS DEDUCTED T DS THEREON WHEN THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNEL . THE CIT(A) HAS ALSO NOTED THE SUBMISSIONS OF THE ASSESSEE TOWA RDS NATURE OF SERVICES. THE CIT(A) IN OUR VIEW HAS TAKEN A HOLIS TIC VIEW OF THE ITA NO. 73/AHD/16 [ITO VS. BALAJI ELECTRICAL INSULATORS PVT. LTD.] A.Y. 2010-11 - 9 - MATTER AND ACCEPTED THE CLAIM OF THE ASSESSEE AS BO NAFIDE. WE DO NOT SEE ANY REASON TO DEPART FROM THE VIEW TAKEN BY THE CIT(A). 12. IN THE RESULT, GROUND NO.2 OF THE REVENUES APP EAL IS DISMISSED. 13. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 26/04/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 26/04/2019