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2011 (2) TMI 1117 - AT - Income TaxIncome Accrual - As per agreement entered into between the assessee and the vendors, the assessee supplies them with deep-freezers/freezers/fridges of sizes as per requirement of the Vendors concerned after taking from them full cost of the equipment as Security Deposit - AO treated this as income accrued in this year and CIT(Appeals) also agreed to that proposition – Held that:- The assessee received Deposit for the supply of freezer from the concerned vendors. The freezers are required to safe keep the edible ice-creams. They are required for the purpose of business. The small vendors may not be inclined to purchase the freezers as they are not affordable to them considering their status. This made the assessee company to supply freezer on the receipt of fixed deposit and the compensation of the spread-over period. They are attached with a liability. The accrual comes only on termination of agreement. The business necessity requires cordial relationship with vendors. The assessee cannot treat these two amounts as receipts in the nature of income unless the so-called agreement terminated. Besides the assessee never treated this as income in the books. The assessee consistently holding it so as the amount attached with a liability to refund. Thus there must be a debt owed to the assessee and until this is created in favour of the assessee as a debt due to the assessee, it cannot be said as income accrued - allow this ground of the assessee as it cannot be treated as income for the year relevant under appeal. Sale proceeds of land - to be treated as business income or under capital gains - AO considered the transaction of the assessee as business activity as the other objects for which the company was established included carrying on of the business Agency for real estate also among other items of business mentioned therein - Held that:- Assessee, whose prime business is manufacturing and selling of ice creams. The Memorandum of Association includes an enabling clause for the assessee to carry on the business of Agency for real estate among others. This clause was heavily relied upon by the Assessing Officer. The argument of the department that the assessee possessed substantial land holdings and frequent purchase of land is definite an Adventure in the nature of trade is not proved and accordingly we reject this contention. On the other hand, the assessee has proved the same in the negative that it is only a transfer of capital asset not of any business income in the nature of adventure in the nature of trade. The decision of M. Raman Pillai (1963 (8) TMI 41 - KERALA HIGH COURT) is clearly on the identical issue answering in the negative and against the department. In favour of assessee.
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